Eiger BioPharmaceuticals
Annual Report 2016

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-K (Mark One)☒☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2016or☐☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to .Commission file number 001-36183 Eiger BioPharmaceuticals, Inc.(Exact name of registrant as specified in its charter) Delaware 33-0971591(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.) 350 Cambridge Avenue, Suite 350, Palo Alto, CA 94306(Address of principal executive offices) (Zip Code) (650) 272 6138(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registeredCommon Stock, par value $0.001 per share The NASDAQ Global Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submittedand posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit andpost such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company ☒ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒The aggregate market value of voting and non-voting common stock held by non-affiliates of the registrant as of June 30, 2016 totaled approximately $72,484,515 based onthe closing price of $19.82 as reported by the NASDAQ Global Market.The number of outstanding shares of the registrant’s common stock, par value $0.0001 per share, as of March 16, 2017 was 8,361,196.  Eiger BioPharmaceuticals, Inc.Form 10-KFor the Fiscal Year Ended December 31, 2016TABLE OF CONTENTS PART I 1 ITEM 1. Business 2 ITEM 1A. Risk Factors 45 ITEM 1B. Unresolved Staff Comments 73 ITEM 2. Properties 73 ITEM 3. Legal Proceedings 74 ITEM 4 Mine Safety Disclosures 74 PART II 75 ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 75 ITEM 6. Selected Financial Data 75 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 76 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 85 ITEM 8. Financial Statements and Supplementary Data 86 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 113 ITEM 9A. Controls and Procedures 113 ITEM 9B. Other Information 114 PART III 115 ITEM 10. Directors, Executive Officers and Corporate Governance 115 ITEM 11. Executive Compensation 115 ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 115 ITEM 13. Certain Relationships and Related Party Transactions, and Director Independence 115 ITEM 14. Principal Accounting Fees and Services 115 PART IV 116 ITEM 15. Exhibits and Financial Statement Schedules 116 i PART IForward-Looking StatementsThis Annual Report on Form 10-K, including the sections entitled “Business,” “Risk Factors” and “Management’s Discussion and Analysis of FinancialCondition and Results of Operations,” may contain “forward-looking statements.” We may, in some cases, use words such as “anticipate,” “believe,” “could,”“estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of those terms, and similarexpressions that convey uncertainty of future events or outcomes, to identify these forward-looking statements. Any statements contained herein that are notstatements of historical facts may be deemed to be forward-looking statements. Forward-looking statements in this Annual Report include, but are not limitedto, statements about: •the success, cost and timing of our product development activities and clinical trials; •our ability and the time required to obtain and maintain regulatory approval for lonafarnib, lambda, exendin 9-39 and ubenimex, and any ofour future product candidates, and any related restrictions, limitations, and/or warnings in the label of an approved product candidate; •our ability to obtain funding for our operations, including funding necessary to complete all clinical trials that may potentially be requiredto file a new drug application, or NDA, and a Marketing Authorization Application, or MAA, for our product candidates; •the commercialization of our product candidates, if approved; •our plans to research, develop and commercialize our product candidates; •our ability to attract collaborators with development, regulatory and commercialization expertise; •the size and growth potential of the markets for our product candidates, and our ability to serve those markets; •the rate and degree of market acceptance of our product candidates; •regulatory developments in the United States and foreign countries; •the performance of our third-party suppliers and manufacturers; •the success of competing therapies that are or may become available; •our ability to attract and retain key scientific or management personnel; •the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing; •our expectations regarding the period during which we qualify as an emerging growth company under the Jumpstart Our Business StartupsAct of 2012, or the JOBS Act; and •our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates.These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as ofthe filing date of this Annual Report and are subject to risks and uncertainties. We discuss many of these risks in greater detail under “Risk Factors.”Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actualresults to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place unduereliance on these forward-looking statements. Except as required by law, we undertake no obligation to publicly update any forward-looking statements,whether as a result of new information, future events or otherwise.1 ITEM 1. BusinessMerger of Celladon Corporation and Eiger BioPharmaceuticals, Inc.On March 22, 2016, Celladon Corporation, or Celladon, and privately-held Eiger BioPharmaceuticals, Inc., or Private Eiger, completed a businesscombination in accordance with the terms of the Agreement and Plan of Merger and Reorganization, or the Merger Agreement, dated as of November 18,2015, by and among Celladon, Celladon Merger Sub, Inc., a wholly-owned subsidiary of Celladon, or Merger Sub, and Private Eiger, pursuant to whichMerger Sub merged with and into Private Eiger, with Private Eiger surviving as a wholly-owned subsidiary of Celladon. This transaction is referred to hereinas “the Merger.” Immediately following the Merger, Celladon changed its name to “Eiger BioPharmaceuticals, Inc.” In connection with the closing of theMerger, our common stock began trading on The NASDAQ Global Market under the ticker symbol “EIGR” on March 23, 2016.OverviewWe are a clinical stage biopharmaceutical company focused on bringing to market novel product candidates for the treatment of orphan diseases. Since ourfounding in 2008, we have worked with investigators at Stanford University and evaluated a number of potential development candidates frompharmaceutical companies to comprise a pipeline of novel product candidates. Our resulting pipeline includes five Phase 2 development programsaddressing four distinct orphan diseases. The programs have several aspects in common: the disease targets represent conditions of high medical need whichare inadequately treated by current standard of care; the therapeutic approaches are supported by an understanding of disease biology and mechanism aselucidated by our academic research relationships; prior clinical experience with the product candidates guides an understanding of safety; and thedevelopment paths leverage the experience and capabilities of our experienced, commercially focused management team. The pipeline includes lonafarnibfor Hepatitis Delta Virus, or HDV, PEG-interferon lambda-1a (lambda) for HDV, exendin 9-39 for Post-Bariatric Hypoglycemia, or PBH and ubenimex forPulmonary Arterial Hypertension, or PAH and lymphedema. We plan to deliver data from all ongoing Phase 2 clinical trials over the course of the nexteighteen months.Our current project timelines, planned development and regulatory pathways are illustrated below. As discussed above, prior clinical experience by ourlicensors with the product candidates has supported and guided our understanding of safety in advancing these products in our clinical developmentprograms. Specifically, we in-licensed lonafarnib from Merck Sharp & Dohme Corp, or Merck, in 2010; licensed ubenimex from Nippon Kayaku Co., Ltd., orNippon Kayaku, in 2015; and licensed lambda from Bristol-Myers Squibb, or BMS, in April 2016. We have relied upon Merck’s, Nippon Kayaku’s andBMS’s prior Phase 1/2/3 clinical data, manufacturing and experience with these three molecules to proceed directly into Phase 2 clinical trials followingauthorization by the U.S. Food and Drug Administration.2 Pipeline Timeline Note: All dates represent our current expectations. Actual timing may vary.Our product candidate pipeline includes five Phase 2 programs: 1.Lonafarnib (LNF)Lonafarnib, or LNF, is an orally bioavailable, small molecule in Phase 2 clinical trials for HDV infection and is our most advanced program. HDV is the mostsevere form of viral hepatitis for which there is currently no approved therapy. Chronic HDV infection can lead to a rapid progression to liver cirrhosis, agreater likelihood of developing liver cancer, and has the highest fatality rate of all the chronic hepatitis infections.We in-licensed LNF from Merck in 2010. LNF blocks the production of HDV virus particles by inhibiting a key step, called prenylation, in the virus lifecycle. To date, over 100 HDV infected patients have been dosed with LNF across international Phase 2 clinical trials. LNF has demonstrated dose-relatedactivity in reducing HDV viral load both as a monotherapy and in combination with other agents. LNF boosted with ritonavir, or RTV, has demonstrated amean viral load reduction in HDV-RNA of 1.15 logs, with some patients achieving HDV-RNA PCR-negativity in twenty-four weeks. LNF boosted with RTVand combined with pegylated interferon alfa, or PEG-IFN-alfa, has demonstrated a mean viral load reduction in HDV-RNA of 5.57 logs, with some patientsachieving HDV-RNA PCR-negativity in twenty-four weeks. Multiple Phase 2 studies of LNF are ongoing with endpoints of clearance of HDV virus(sustained virologic response, or SVR). HDV-RNA PCR-negativity is defined as 0 IU/mL. The most common adverse events experienced with LNF to date aregastrointestinal-related and include anorexia, nausea, vomiting, diarrhea and weight loss.LNF for the treatment of HDV infection has been granted orphan drug designation by the U.S. Food and Drug Administration, or the FDA, and EuropeanMedicines Agency, or EMA. The potential market for HDV therapies in the United States and Western Europe is growing due to increased migration fromregions where the disease is endemic, primarily from Eastern Europe, the Middle East and Asia. 3 2.LambdaLambda is our second Phase 2 program treating HDV. Lambda is a well-characterized, late-stage, first in class, type III interferon, or IFN, that stimulatesimmune responses that are critical for the development of host protection during viral infections. Lambda targets type III IFN receptors which are distinctfrom the type I IFN, receptors targeted by PEG, or pegylated, IFN-alfa. These type III receptors are highly expressed on hepatocytes with limited expression onhematopoietic and central nervous system cells, which has been demonstrated to reduce the off-target effects associated with other IFNs and improve thetolerability of lambda. Although lambda does not use the IFN-alfa receptor, signaling through either the IFN-lambda or IFN-alfa receptor complexes results inthe activation of the same Jak-STAT signal transduction cascade.We licensed worldwide rights to lambda from BMS in April 2016. Lambda has been administered in clinical trials involving over 3,000 patients infectedwith the Hepatitis B Virus, or HBV, or Hepatitis C Virus, or HCV. Lambda has not been approved for any indication. We plan to evaluate lambda as both amonotherapy and in a combination therapy with lonafarnib. Currently, we are conducting a Phase 2 monotherapy study using lambda to treat HDV and arerecruiting and dosing at four international sites. We currently plan to file a US IND for lambda in HDV in April 2017. 3.Exendin 9-39Exendin 9-39 is the third Phase 2 program and we are developing this candidate as a treatment for PBH. PBH is a debilitating and potentially life-threateningcondition for which there is currently no approved therapy. This disorder occurs often in a subset of bariatric surgeries called Roux-en-Y gastric bypass, orRYGB, where affected patients experience frequent symptomatic hypoglycemia, with blood glucose concentrations often low enough to cause seizures,altered mental status, loss of consciousness and even death. Gastric bypass procedures are widely performed and are increasing in frequency for medicallycomplicated obesity.To date, research at Stanford has generated results demonstrating clinical proof of concept in 29 patients suffering from PBH indicating that exendin 9-39 canpotentially prevent post-prandial hypoglycemia in affected patients. Exendin 9-39 is a glucagon-like peptide-1, or GLP-1, receptor antagonist that competeswith endogenous GLP-1 and has the potential to prevent the excessive post-prandial insulin release that characterizes this disorder. These data weregenerated using both intravenous and subcutaneous, or SC, formulation delivery developed by Stanford. Pharmacokinetics from this Phase 2 SC studyindicate that the SC formulation could enable once or twice a day pre-prandial dosing. We developed a proprietary SC formulation and plan to initiate aPhase 1 dose-ranging pharmacokinetics trial in healthy humans and a Phase 2 28-day trial in affected patients with our exendin 9-39 SC formulation in 2017.In December 2016, Eiger filed an Investigational New Drug application for exendin 9-39 in the United States. Exendin 9-39 for the treatment ofhyperinsulinemic hypoglycemia has been granted orphan drug designation by the FDA and EMA. 4.Ubenimex PAHOur fourth Phase 2 program is ubenimex for the treatment of Pulmonary Arterial Hypertension or PAH. PAH is a life-threatening disease characterized byincreased pulmonary vascular resistance, heart failure and premature death.Ubenimex is a well-characterized, oral, small-molecule inhibitor of leukotriene A4 hydrolase, or LTA4H, the enzyme responsible for converting theinflammatory mediator leukotriene A4, or LTA4, to leukotriene B4, or LTB4. Results of a preclinical study published in Science Translational Medicine(Tian, W. et al. “Blocking Macrophage Leukotriene B4 Prevents Endothelial Injury and Reverses Pulmonary Hypertension,” Sci Transl Med, 2013; 5:1) byStanford researchers have demonstrated that both LTB4 and LTA4H are elevated in animal models of PAH and human PAH disease. In that study, elevatedLTB4 caused inflammation resulting in arteriole occlusion and hypertension in animal models of PAH. Targeted pharmacologic inhibition of LTB4,including ubenimex, reversed PAH disease in treated rat animal models; obstructed arterioles opened, cardiac function improved, and the animals survived.Based on the findings in these models that pathological inflammation may be important in the etiology of PAH, we believe that ubenimex is an attractivecandidate for clinical development. Ubenimex was granted orphan4 drug designation by the FDA and EMA. In addition, we were granted U.S. patent allowances for claims in PAH in September 2015. We are currentlyconducting a Phase 2 clinical trial of ubenimex in patients with PAH, referred to herein as “the LIBERTY Study,” and expect recruiting to be completed inthe first half of 2017. We anticipate the completion of dosing in the LIBERTY Study by end of 2017 with data in early 2018.Ubenimex was licensed from Nippon Kayaku, and we have exclusive rights in the United States, Europe and certain other countries to develop ubenimex forPAH as well as other inflammatory diseases involving LTB4. Ubenimex has been marketed in Japan and other countries outside of our licensed territories byNippon Kayaku for over 25 years for a different indication. 5.Ubenimex lymphedemaOur fifth Phase 2 program involves clinical development of ubenimex in lymphedema, which is a state of vascular functional insufficiency in whichdecreased clearance of interstitial fluid through the lymphatic vasculature leads to edema formation and to progressive, debilitating architectural alterationsin skin and supporting tissues. There is no approved pharmacologic therapy. The current standard of therapy involves compression garments.Researchers at Stanford have demonstrated for the first time that LTB4 is elevated in both animal models of lymphedema as well as human lymphedema andthat elevated LTB4 is associated with tissue inflammation and impaired lymphatic function. In that research, applying inhibitors of LTB4 promotedphysiologic lymphatic repair and reversed lymphedema in treated animals. We are seeking orphan drug designation for ubenimex in lymphedema. We arecurrently conducting a Phase 2 clinical trial (ULTRA Study) treating subjects with lyphedema with ubenimex. We intend to complete enrollment of theULTRA Study in the fourth quarter of 2017 and expect results from this Phase 2 clinical trial in the first half of 2018.We believe that our approach to clinical development enables achievement of early clinical signals of efficacy and safety in our Phase 2 programs andpotentially reduces clinical risks and costs inherent in the drug discovery and development process. We have a highly experienced management team whosemembers have, in the course of their prior employment, participated in bringing more than 20 product candidates through regulatory approval and intocommercialization. We plan to leverage our management team’s breadth and depth of experience in clinical and regulatory drug development as well asmarket development and commercialization to identify potentially promising product candidates to address unmet medical needs.Our current product candidate pipeline has been obtained by in-licensing from pharmaceutical companies. With our focus on orphan diseases, our strategy isto acquire and retain some or all commercialization rights to our products in significant territories to diversify risk, identify a rapid regulatory pathway toapproval and minimize the development investment in order to maximize long-term value for our stockholders. Over time, depending upon the data andpotential market opportunity, we expect to establish a commercial organization, which we believe can be targeted and cost effective for selected, promisingorphan disease designated programs. We plan to balance these interests with opportunities to out-license assets from our portfolio enhance stockholder valuethrough partnerships and other strategic relationships.Business Model and Management TeamWe plan to continue evaluating in-licensing opportunities in order to enhance our pipeline and leverage our business development, clinical development,regulatory and commercial expertise. We believe our management team has the capability and experience to continue to execute this model. Ourmanagement team has worked in other private and public biotechnology companies such as Prestwick Pharmaceuticals, New River Pharmaceuticals, ClinicalData Inc., CoTherix and InterMune, each of which was acquired by a larger pharmaceutical industry company. Our management also has previous workexperience, in some cases working together, at pharmaceutical companies, including The Upjohn Company, Glaxo, Glaxo Wellcome, Glaxo Smith Kline,Arena Pharmaceuticals, Alza (Johnson and Johnson), Halozyme, Clinical Data Inc., New River Pharmaceuticals, Dynavax, Covance, Genentech and GileadSciences.5 Our StrategyOur mission is to identify, develop, and, directly or through collaborations, bring to market novel products that receive orphan drug designation for thetreatment of rare diseases or conditions. We currently have a diverse portfolio of well-characterized product candidates with the potential to address diseasesfor which the unmet medical need is high, the biology for treatment is believed to be understood, and for which an effective therapy is not available. Our goalis to be a leader in the development and commercialization of novel therapeutics for serious unmet medical needs in orphan diseases. Our focus to achievethis goal will be to utilize our experience and capabilities to: •Advance our existing product candidates through late-stage clinical trials, generating meaningful clinical results; •Work with U.S. and international regulatory authorities for expeditious, efficient development pathways toward registration; •Prepare for commercialization of each program; •Use our industry relationships and experience to source, evaluate and in-license well-characterized product candidates to continue pipelinedevelopment; and •Identify potential commercial or distribution partners for our products in relevant territories.Our Product CandidatesLonafarnib in HDVLonafarnib (LNF) is a small molecule that we in-licensed from Merck in 2010 that we are advancing for the treatment of HDV infection. LNF is a well-characterized, orally active inhibitor of farnesyl transferase, an enzyme involved in modification of proteins through a process called prenylation. HDV usesthis prenylation process inside host liver cells to complete a key step in its life cycle. LNF inhibits the prenylation step of HDV replication inside liver cellsand blocks the virus life cycle at the stage of assembly. Since prenylation is carried out by a host enzyme, there is a higher barrier to develop viral resistancemutations to LNF therapy. We have generated clinical results in over 100 HDV-infected patients in Phase 2 trials, across international study sites,demonstrating rapid decreases in HDV viral loads and no resistance. We intend to initiate additional Phase 2 trials of longer duration using LNF incombination with RTV and possibly other antiviral therapies with a goal of addressing chronic HDV infection.Lambda in HDVLambda is a well-characterized, late-stage, first in class, type III interferon (IFN) that we in-licensed from BMS in April 2016 for the treatment of HDV.Lambda stimulates immune responses that are critical for the development of host protection during viral infections. Lambda targets type III IFN receptorswhich are distinct from the type I IFN receptors targeted by IFN-alfa. These type III receptors are highly expressed on hepatocytes with limited expression onhematopoietic and central nervous system cells, which in BMS’s clinical trials has demonstrated to reduce the off-target effects associated with other IFNsand improve the tolerability of lambda. Although lambda does not use the IFN-alfa receptor, signaling through either the lambda or IFN-alfa receptorcomplexes results in the activation of the same Jak-STAT signal transduction cascade. Lambda has not been approved for any indication. We plan to evaluatelambda as both a monotherapy and in a combination therapy with lonafarnib. Currently, we are conducting a Phase 2 monotherapy study using lambda totreat HDV and are recruiting patients and dosing at four international sites.Hepatitis Delta Virus OverviewAbout Hepatitis Delta VirusHepatitis delta infection is caused by HDV, a small circular ribonucleic acid, or RNA, that expresses only one protein, the hepatitis delta antigen, or HDAg.There are two forms of HDAg; small and large. Together, these two forms of HDAg and the single-stranded RNA genome are surrounded by a lipid envelope,which is embedded with Hepatitis B Virus, or HBV surface antigen, or HBsAg, proteins. HDV does not encode its own envelope proteins6 and must acquire them from HBV during the final steps of replication. Hence, natural HDV infections always occur in the presence of a co-existing HBVinfection. HBsAg is the only element of HBV relied upon by HDV. HDV replication can occur independently of HBV replication.HDV is the most severe form of viral hepatitis. HDV can be acquired either by co-infection (a simultaneous co-infection with HDV and HBV) or by super-infection (HDV infection of someone already harboring a chronic HBV infection). Both co-infection and super-infection with HDV result in more severecomplications compared to infection with HBV alone. These complications include a greater likelihood of experiencing liver failure in acute infections and arapid progression to liver cirrhosis, with an increased chance of developing liver cancer in chronic infections. HDV has the highest fatality rate of all thehepatitis infections at up to 20%. Although HDV/HBV simultaneous co-infection in adults usually resolves completely, in some cases it can becomefulminant hepatitis, which carries a very high mortality rate. In the case of super-infections, the predominant form of HDV, HDV super-infection leads to amore severe form of disease than chronic HBV mono-infection. In a study published in 1987 in the Journal of Infectious Diseases (Fattovich, G. et al.“Influence of Hepatitis Delta Virus Infection on Progression to Cirrhosis in Chronic Hepatitis Type B,” J Infect Dis, 1987; 155:931), histological liverdeterioration was observed in 77% of HBV patients co-infected with HDV over a 15-year follow-up period, versus 30% of patients infected with HBV alone(p<0.01). In a 2013 study of chronic HBV patients published in the Journal of Gastroenterology and Hepatology (Gish, R. et al. “Coinfection with hepatitis Band D: epidemiology, prevalence and disease in patients in Northern California,” J Gastroenterol Hepatol, 2013; 28(9):1521), cirrhosis was present in 73% ofHBV patients co-infected with HDV, compared to only 22% of those infected with HBV alone. Patients co-infected with HDV are more than twice-as-likely todevelop liver-related complications, cirrhosis, or require liver transplants than matched patients infected with HBV alone.HDV is generally spread through exchange of body fluids either sexually or through contact with infected blood. Globally, it is estimated that between 4.3%and 5.7% of the 240 million worldwide chronic HBV population, or 15 to 20 million people, are infected with HDV. The prevalence of HDV in patientsinfected with chronic HBV is even higher in certain regions, including certain parts of Mongolia, China, Russia, Central Asia, Pakistan, Turkey, Africa andSouth America, with an HDV prevalence as high as 60% being reported in HBV-infected patients in Mongolia and Pakistan. The prevalence of HDV hasrecently begun to increase in Western Europe and the United States due to migration from countries with high infection rates.The Role of HDV Screening in Identifying Patients Who May Benefit From LNF and/or LambdaThere are diagnostic tests in use today in clinical laboratories to detect anti-HDV antibodies in serum. These tests are currently able to detect acute HDVinfections after four weeks, but they are poor tests for active HDV infections. Active HDV infections are best detected by reverse transcriptase-polymerasechain reaction, or RT-PCR, assays for genomic RNA. These assays yield a quantitative assessment of the number of viral particles, or viral load, in serum. Acommercial assay for quantitative HDV RNA is currently available in Europe. A commercial assay for quantitative HDV RNA was made available in theUnited States in October 2016.Prior to the availability of a commercial HDV RNA quantitative assay in the United States, we had developed an HDV RNA quantitative assay that has beencalibrated using the World Health Organization HDV standard provided by the Paul Erhlich Institute in Germany. We have used this assay to quantitate HDVRNA in some of our Phase 2 trials.Our initial discussions with payers have indicated that they would be willing to reimburse healthcare providers for HDV RNA quantitative assays that arecarried out following a positive HBsAg test for HBV. We have recently transferred our HDV RNA quantitative assay into a commercial laboratory in theUnited States. This assay is now commercially available and is the first HDV RNA quantitative assay in the United States. A commercially available assaywill increase the number of assays performed and increase the number of identified patients who can potentially benefit from an HDV therapy such as LNF.7 Current Therapy for HDVCurrently, there is no FDA approved therapy for hepatitis delta infection. The American Association for the Study of Liver Diseases, or the AASLD,guidelines suggest treatment of chronic hepatitis delta infections with IFN-alfa. In clinical trials of IFN-alfa or PEG-IFN-alfa, between 25% and 33% of HDVinfected patients were able to clear their infections after a minimum of 48 weeks of therapy, with some requiring two years of therapy. However, long-termtherapy with IFN-alfa is known to be associated with numerous adverse events and tolerability is a significant problem for some of these patients. HBVnucleoside analogs that inhibit HBV genome replication are ineffective against HDV since they are ineffective in suppressing the expression HBsAg. Otherantiviral therapies have been tested including our ongoing Phase 2 study using lambda to treat HDV, but none have yet shown to be effective against HDVinfection.HDV Replication and PrenylationAfter HDV enters a target cell hepatocyte, the genome is translocated to the nucleus where genome replication occurs and the two forms of HDAg small deltaantigen, or SHDAg, and large delta antigen, or LHDAg, are produced. The newly formed HDV genome and the small and large delta antigen must acquire alipid envelope from HBV to complete the assembly process. An important interaction between HDV and HBV proteins has been shown to depend on thepresence of the last four amino acids of the large delta antigen, comprising a CXXX box motif, where C represents cysteine and X denotes any other aminoacid. This amino acid sequence is required for LHDAg to be prenylated by a host enzyme which covalently attaches a 15-carbon prenyl lipid (farnesyl-moiety) to the cysteine of the CXXX box. Prenylation of the large delta antigen renders it more lipophilic, promotes its association with HBsAg and isessential for initiating the HDV particle formation process. Our approach involves targeting this host process called prenylation, or protein farnesylation,which has been shown to be essential for the last steps in HDV replication, the assembly and release of new virus progeny.In the 1980s farnesyltransferase inhibitors were developed by multiple pharmaceutical companies for oncology indications. Addition of a farnesyl or prenyllipid group to the Ras protein, or Ras, a well-known and important regulator of cellular proliferation, allows for membrane association. Once membranebound, Ras may then be activated. The importance of activated Ras in tumor development was demonstrated by sequence analyses of tumors from patientswhere up to 30% have mutations involving Ras. Several prenylation inhibitors were developed in oncology and taken into the clinic and in some casesthrough late-stage clinical development. However, these programs did not lead to approvals, due to a lack of compelling efficacy. The class-related, dose-limiting toxicity has been gastrointestinal side effects including nausea, vomiting, diarrhea and weight loss.Published studies conducted by Stanford researchers demonstrated that farnesyltransferase inhibitors block HDV viral production both in cellularexperiments and in HDV transgenic mice. Targeting prenylation or farnesyl transferase, a host target, significantly reduces the likelihood of HDV developingresistance to escape effects of antiviral therapy. Viruses mutate quickly and there is a higher rate of mutations in viral replication compared to mammaliancell division. However, no matter how much HDV may mutate, these changes are unlikely to alter the host process of prenylation which HDV requires tocomplete packaging. Thus, targeting a host prenylation process provides what we believe to be a higher barrier to resistance. Identification of clinic-readyfarnesylation inhibitors has allowed us to move rapidly into proof-of-concept studies in humans.Our Solution: LNF for HDVLNF is a well-characterized, orally active inhibitor of farnesyl transferase. LNF inhibits the prenylation step of HDV replication inside liver cells and blocksthe ability of the virus to multiply. Since prenylation is a host process, not under control of HDV, and LNF inhibits prenylation, we believe that there is also apotentially higher barrier to resistance with LNF therapy. LNF for the treatment of HDV infection has been granted orphan drug designation in Europe andthe United States, and LNF in combination with RTV has been granted Fast Track designation from FDA for the treatment of chronic HDV infections. Wehave completed three Phase 2 clinical trials including Proof of Concept (NIH), LOWR HDV – 3 (NIH) and LOWR HDV – 4 (Hannover, Germany), and are inthe final stages of completing a Phase 2 clinical trial LOWR HDV – 1 and LOWR HDV - 2 study (Ankara, Turkey). The LOWR HDV – 1 and LOWR HDV – 2study are not yet complete and therefore, efficacy and safety may not be well-characterized at this time. In addition, we intend to initiate the LOWR HDV–5clinical study to examine multiple LNF dose levels and examine long term dosing regimens (Ulaanbaatar, Mongolia). LNF has never been approved orcommercialized for any indication.8 LNF Clinical DataWe in-licensed LNF from Merck in 2010, and have relied upon Merck’s prior Phase 1, 2 and 3 clinical experience with LNF to understand safety andpharmacokinetics.Merck conducted four Phase 1 studies in 85 healthy volunteers to study food effect (study P00042), absorption, metabolism and excretion (study P00260),ketoconazole drug interaction (study P00393), and the effect of age and gender (study P02673) of LNF.In study P00042, administration of LNF with food decreased the rate and extent of LNF absorption in healthy subjects when administered as a single 100 mgdose of LNF. The relative oral bioavailability of LNF for subjects that ate prior to receiving LNF compared to those that fasted prior to receiving lonafarnibwas 48% based on measuring the maximum serum concentration, or Cmax, and 77% based measuring the concentration of the LNF in the blood plasma overtime, or AUC. However, administration of LNF with food did not have a significant effect on LNF bioavailability in subjects following multiple-doseadministration. In addition, inter-subject variability was lower (~16%) following multiple-dose administration with food. Given the apparent lower incidenceof gastrointestinal side effects and the lower inter-subject variability, it is currently recommended to dose LNF with food.Study P00260 was an absorption, metabolism and excretion study conducted in healthy volunteers following single-dose administration of LNF. Drug-derived radioactivity was primarily excreted via the feces. Mean cumulative excretion of radioactivity was 61% in feces and less than 1% in urine up to 24hours post-dose. Metabolite profiles in plasma, urine, and feces showed that LNF was metabolized extensively. The common metabolic pathways includedoxidation, dehydrogenation, and combinations of these two processes. The results of in vivo metabolic profiling and in vitro metabolism studies indicate thatno human-specific LNF metabolites are formed.Study P00393 was a two-way crossover study that was conducted in 16 healthy volunteers exploring the interaction of LNF with ketoconazole, an anti-fungal medication and a CYP3A4 inhibitor. LNF is extensively metabolized by CYP3A4. Co-administration of single-dose LNF (50 mg) and multiple dosesof ketoconazole (200 mg BID for 5 days) resulted in an approximately five-fold increase in LNF exposures, and an increase in the mean elimination half-lifefrom 2.7 hours to 4 hours. Administration of LNF with ketoconazole was also associated with lower inter-subject variability than when LNF was administeredwith a placebo.Study P02673 was a single-center, single-dose study conducted in 48 healthy volunteers (24 males and 24 females). Twenty-four of the subjects werebetween the ages of 18 and 45 and the other 24 subjects were 65 years old or older. Each subject received a single 100 mg dose of LNF in the morning after astandardized meal. PK data suggested that LNF exposures were higher in female subjects (44% higher) as compared to male subjects. Additionally, LNFexposures in subjects 65 years old or older were approximately 59% higher as compared to the younger healthy subject population. Young male subjects hadthe lowest LNF systemic exposures; AUC values in male subjects between the ages of 18 and 45 were approximately 50% lower than female and elderlysubjects.We conducted a Phase 1 study with goals including: evaluating the effects of multiple-dosing of an antacid (proton pump inhibitor or H2-receptorantagonist) on the systemic absorption of a single dose of LNF, and evaluating the effects of multiple-dosing of LNF on the inhibition potential of thecytochrome P450 enzyme, CYP2C19. The Phase 1 study results demonstrated a weak effect on systemic absorption of LNF following administration of anantacid, which we believe reduces the risk for the use of an antacid by patients treated with LNF to manage possible dyspepsia during treatment. ThesePhase 1 study results also demonstrated a weak inhibitory activity of LNF on CYP2C19, which we further believe reduces the risk for the use of concomitantmedications that are metabolized by CYP2C19 by patients treated with LNF.In addition to the above Phase 1 studies, under our direction, LNF has been tested in five Phase 2 trials (POC, LOWR HDV – 1, LOWR HDV – 2, LOWR HDV– 3, LOWR HDV – 4) in over 100 HDV-infected patients.9 National Institutes of Health (NIH) Clinical Proof-of-Concept Phase 2a Study in HDVThe National Institutes of Health, or the NIH, conducted a 14 patient, double blind, placebo-controlled, proof of concept study, which was the first ever toevaluate LNF in patients infected with HDV. Patients either received LNF 100 mg (group 1) or LNF 200 mg (group 2) twice daily, or BID, for 28 days with sixmonths of follow-up. Both groups enrolled six treatment participants and two placebo participants. The two placebo patients from group 1 later receivedopen-label LNF as group 2 participants. Doses of 100 mg and 200 mg of LNF administered BID demonstrated a dose dependent decrease in viral loads of 0.73and 1.54 log decline, respectively, in 28 days. The results were published in The Lancet Infectious Diseases Journal in 2015. As shown in the table above, statistically significant decreases in HDV RNA viral load were demonstrated by both the 100 mg of LNF BID (p=0.03) and 200mg of LNF BID (p<0.0001) active groups versus the placebo. A statistically significant correlation between increasing LNF serum levels and decreasing HDVRNA viral loads was also demonstrated. The 100 mg twice daily dose was well-tolerated with less frequent GI AEs such as nausea and diarrhea experienced inthe 200 mg twice daily dose. No resistant variants were identified from population-based sequencing of HDV infected patients after 28 days of treatment withLNF.A p-value is a statistical measure of the probability that the difference in two values could have occurred by chance. The smaller the p-value, the greater thestatistical significance and confidence in the result. Typically, results are considered statistically significant if they have a p-value less than 0.05, meaningthat there is less than a one-in-20 likelihood that the observed results occurred by chance. The FDA requires that sponsors demonstrate the effectiveness andsafety of their product candidates through the conduct of adequate and well-controlled studies in order to obtain marketing approval. Typically, the FDArequires a p-value of less than 0.05 to establish the statistical significance of a clinical trial, although there are no laws or regulations requiring that clinicaldata be statistically significant, or that require a specific p-value, in order for the FDA to grant approval.10 In 2014, we initiated the LOWR HDV (LOnafarnib With Ritonavir in HDV) Phase 2 Program. The objective of this program is to identify dose(s) andregimen(s) for registration. To date, over 100 HDV subjects have been dosed with LNF in multiple studies including: •LOWR HDV – 1 Study (Combination: LNF with RTV or PEG IFN-α) •LOWR HDV – 2 Study (Dose Finding: LNF + RTV ± PEG IFN-α) •LOWR HDV – 3 Study (QD Dosing: LNF + RTV) •LOWR HDV – 4 Study (Dose-Escalation: LNF + RTV) •LOWR HDV – 5 Study (All-oral Bridging Study to Registration: LNF + RTV)LOWR HDV—1 (LOnafarnib With and without Ritonavir in HDV - 1) Phase 2 StudyThe LOWR HDV—1 trial studied LNF in 21 subjects who were enrolled into one of seven groups for durations of 4-12 weeks (three patients in each group):LNF 200 mg BID (12 weeks), LNF 300 mg BID (12 weeks), LNF 100 mg TID (4 weeks), LNF 100 mg BID + RTV 100 mg QD (8 weeks), LNF 100 mg BID +PEG-IFN-alfa 180 mcg QW (8 weeks), LNF 200 mg BID + PEG-IFN-alfa 180 mcg QW (8 weeks) and LNF 300 mg BID + PEG-IFN-alfa 180 mcg QW (8 weeks).In LNF monotherapy treatment groups, increasing the dosage of LNF from 100 mg three times a day to 200 mg twice a day to 300 mg twice a day led togreater reductions in viral loads at Week 4 (1.2 logs versus 1.6 logs versus 2.0 logs). However, increasing the dosage of LNF also led to increasinggastrointestinal, or GI, intolerability and was not considered for longer term dosing.In the LNF-RTV combination arm of LOWR HDV—1, 100 mg of LNF BID was combined with 100 mg of RTV once daily. RTV is a pharmacokinetic, or PK,enhancer known to inhibit the metabolism of LNF, allowing lower doses of LNF to be administered, while resulting in higher systemic concentrations of LNF.The addition of 100 mg of RTV once daily to 100 mg LNF BID led to a four- to five-fold increase in the serum concentration of LNF in treated patientscompared to LNF 100 mg BID alone. This dose combination led to a mean viral load decrease of 2.4 logs after 28 days of treatment, which is a greater thanthree-fold reduction in viral load compared to the NIH data of a mean viral load decrease of 0.74 logs after 28 days of monotherapy treatment of 100 mg LNFBID. Extending dosing to Week 8 resulted in a 3.2 viral load decline. Importantly, when therapy was discontinued the viral loads rebounded, which webelieve indicates that LNF treatment was eliciting an antiviral effect. The addition of 180 mcg of PEG-IFN-alfa once weekly to 100 mg LNF BID was alsomore active in reducing HDV RNA versus studies with either agent alone. This dose combination led to a greater reduction in viral load, compared to the NIHresults on monotherapy treatment with 100 mg LNF BID, with a mean decrease of 0.74 logs versus 1.8 logs after four weeks. Extending dosing to eight weeksresulted in a 3.0 logs viral load decline. Importantly, when therapy was discontinued the viral loads rebounded. The mean change in HDV RNA for thepatients receiving eight weeks of treatment of 100 mg LNF BID in combination with RTV and 100 mg LNF BID in combination with PEG-IFN-alfa is shownbelow. Viral loads for LNF 200 mg and 300 mg BID in combination with PEG-IFN-alfa was not shown since these dosages were intolerable (all patientsdiscontinued) for future development. LOWR HDV-1 did not include a placebo arm and, as such, statistical significance could not be determined.11 Liver enzymes are often elevated during infections with viral hepatitis, a sign of damage being done to liver cells. In both LNF combination cohorts, all HDVpatients enrolled had elevated alanine aminotransferase, or ALT, a liver enzyme that is a surrogate marker of inflammation, prior to receiving any treatment.By the end of eight weeks of combination therapy with LNF and RTV or LNF and PEG-IFN-alfa, all patients’ ALT liver enzymes normalized or trendedtoward normal while on therapy.12 In the three patients receiving LNF in combination with RTV and the three patients receiving LNF in combination with PEG-IFN-alfa, we observed decreasesin HDV RNA viral load of approximately 3.2 logs and 3.0 logs after eight weeks of treatment, respectively. For comparison, and as shown in the figure below,published data from the HIDIT-2 trial of PEG-IFN-alfa in 91 HDV infected patients demonstrated a mean decline in HDV RNA of approximately 1.6 logs and2.7 logs after 8 weeks and 48 weeks, respectively. The HIDIT-2 (Hep-Net International Delta Hepatitis International Trial-II) was a multicenter randomizedtrial studying effects of PEG-IFN-alfa plus tenofovir in chronic HDV patients, and is the largest clinical study to date in HDV. The HIDIT-2 trial wasconducted on 91 patients, whereas the LOWR HDV—1 study was conducted on an aggregate of 21 patients, with three patients per treatment arm. If theLOWR HDV—1 trial was conducted on a larger group of patients, the mean HDV RNA decline may differ from the 3.2 log and 3.0 log declines after eightweeks of treatment observed in the three patient arms receiving LNF combination treatment in the LOWR HDV—1 trial. However, based on clinical results todate, we expect all patients who are treated with LNF to show a viral load response. The LOWR HDV – 1 study (combined with LOWR HDV – 2, collectivelyEIG-300) is not yet complete and we have identified and continue to assess certain good clinical practice violations at one site that may impact certain dataand information that we plan to submit to the FDA. LOWR HDV—2 (LOnafarnib With Ritonavir in HDV - 2) Phase 2 StudyLOWR HDV – 2 is a dose-finding Phase 2 study of multiple doses of LNF boosted by RTV with and without PEG-IFN-alfa in 58 subjects for 24-48 weeks oftreatment with 24 weeks of follow-up, with the aim to identify regimen(s) with improved tolerability for the longer-term registration studies. LOWR HDV – 2(conducted as an extension of LOWR HDV – 1, collectively EIG-300) was conducted at Ankara University in Turkey and we have identified and continue toassess certain good clinical practice violations at this site that may impact certain data and information that we plan to submit to the FDA.Fifty-eight subjects were enrolled into one of ten groups of different LNF with RTV and/or PEG-IFN-alfa combinations for 12 or 24 or 48 weeks as follows:Group 1: LNF 100 mg BID + RTV 50 mg BID; Group 2: LNF 100 mg BID + RTV 100 mg QD; Group 3: LNF 150 mg QD + RTV 100 mg QD; Group 4: LNF100 mg QD + RTV 100 mg QD; Group 5: LNF 75 mg BID + RTV 100 mg BID with PEG-IFN-alfa 180 mcg QW added at week 12; Group 6: LNF 50 mg BID +RTV 100 mg BID; Group 7: LNF 50 mg BID + RTV 100 mg BID with PEG-IFN-alfa 180 mcg QW added at week 12; Group 8: LNF 50 mg BID + RTV 100 mgBID + PEG-IFN-alfa 180 mcg QW; Group 9: LNF 25 mg BID + RTV 100 mg BID; and Group 10: LNF 25 mg BID + RTV 100 mg BID + PEG-IFN-alfa 180 mcgQW.13 Twenty-four-week post-treatment data from LOWR HDV—2 will be presented at the EASL Conference in April 2017. The LOWR HDV – 1 and LOWR HDV– 2 study is not yet complete and we have identified and continue to assess certain good clinical practice violations at one site that may impact certain dataand information that we plan to submit to the FDA.LOWR HDV—3 (LOnafarnib With Ritonavir in HDV - 3) Phase 2 StudyIn November 2015, we initiated LOWR HDV – 3, a double-blind, randomized, placebo-controlled study designed to evaluate the efficacy and tolerability ofonce-daily doses of LNF – 50 mg, 75 mg and 100 mg – each combined with RTV 100 mg once daily for 12 (N=9) or 24 (N=12) weeks. Twenty-one patientswith chronic hepatitis delta were randomized into one of six treatment groups. LOWR HDV – 3 is being conducted at the National Institutes of Health (NIH)Bethesda, MD, and dosing has completed.LOWR HDV—4 (LOnafarnib With Ritonavir in HDV - 4) Phase 2 StudyLOWR HDV – 4 is an open-label study to evaluate the efficacy and tolerability of dose-escalation of LNF combined with RTV administered twice daily fordosing durations of 24 weeks. Fifteen patients were initiated at LNF 50 mg and RTV 100 mg twice daily, and dose-escalated up to LNF 100 mg twice daily atthe discretion of the investigator and patient tolerability. LOWR HDV – 4 is being conducted at Hannover Medical School in Hannover, Germany, anddosing has completed.Week 24 data from LOWR HDV – 2, – 3 and – 4 were presented at AASLD 2016 in Boston, MA. Key findings from the LOWR HDV Program demonstrate thatLNF (all-oral) can achieve HDV-RNA negativity on-treatment, and that the most robust HDV-RNA on-treatment on-anti-viral activity is observed in LNFtriple therapy with PEG-IFN-alfa. Findings demonstrate that LNF-based regimens can normalize ALTs in 60% of patients. With dosing regimens of LNF 25and 50 mg BID identified with predominantly grade 1 GI AEs amongst per-protocol treated patients, 48 week dosing may be possible and expected toimprove outcomes. Early data also indicate that LNF-based regimens can also induce post-treatment HDV-RNA clearance in a subset of patients, suggestingimmune reactivation as a potential second mechanism to achieve HDV-RNA PCR-negativity. Post-treatment follow up on all patients will be reported atEASL 2017. Bridging studies to registration are planned. 14 LOWR HDV—5 (LOnafarnib With Ritonavir in HDV - 5) Phase 2 StudyIn the LOWR HDV – 2 clinical trial, per-protocol patients treated with LNF 25 mg BID + RTV 100 mg BID achieved a mean HDV-RNA decline of 1.8 logsafter 24 weeks of treatment and per-protocol patients treated with LNF 50 mg BID + RTV 100 mg BID achieved HDV-RNA PCR-negativity after 24 weeks oftreatment. Fewer dose reductions support improved GI tolerability of both of these doses compared to higher LNF doses, and support longer dosing durationsof 48 weeks. The LOWR HDV – 1 and LOWR HDV – 2 study is not yet complete we have identified and continue to assess certain good clinical practiceviolations at one site that may impact certain data and information that we plan to submit to the FDA. We believe dosing for 48 weeks may increase thenumber of patients achieving HDV-RNA PCR-negativity and/or provide suppression of HDV-RNA for sufficient duration to observe clinical, histologicalbenefit.LOWR HDV – 5 is a planned, open-label study to evaluate the safety, efficacy and tolerability of all-oral regimens including LNF 25 mg and 50 mgcombined with RTV 100 mg administered twice daily for dosing duration of 48 weeks. Planned endpoints are safety/tolerability, change in HDV-RNA, andchange in ALT and liver histology. LOWR HDV – 5 is a bridging study, with a goal to be supportive of a future registration study. We are awaiting commentsfrom FDA on the LOWR HDV – 5 protocol before beginning this study. We plan to initiate enrollment for LOWR HDV – 5 in Ulaanbaatar, Mongolia as earlyas the second quarter of 2017.Our Second HDV Solution: Lambda for HDVLambda is a well-characterized, late-stage, first in class, type III interferon (IFN) that we in-licensed from Bristol-Myers Squibb in April 2016 for the treatmentof HDV infection. Lambda stimulates immune responses that are critical for the development of host protection during viral infections. Lambda targets typeIII IFN receptors which are distinct from the type I IFN receptors targeted by IFN-alfa. These type III receptors are highly expressed on hepatocytes withlimited expression on hematopoietic and central nervous system cells, which has been demonstrated to reduce the off-target effects associated with other IFNsand improve the tolerability of lambda (Chan 2016). Although lambda does not use the IFN-alfa receptor, signaling through either the IFN-lambda or IFN-alfareceptor complexes results in the activation of the same Jak-STAT signal transduction cascade.15 In clinical trials of IFN-alfa or PEG-IFN-alfa, between 25% and 33% of HDV-infected patients were able to clear their infections after a minimum of 48 weeksof therapy, with some requiring two years of therapy. However, long-term therapy with IFN-alfa is known to be associated with numerous adverse events andtolerability is a significant problem for some of these patients. We believe lambda will be a safer and better tolerated pegylated interferon compared to PEG-IFN-alfa. We are currently enrolling our LIMT HDV (Lambda MonoTherapy) Phase 2 clinical trial in New Zealand, Israel and Pakistan. Lambda has neverbeen approved or commercialized for any indication.Lambda Clinical DataA head-to-head study comparing the safety and efficacy of lambda versus PEG-IFN-alfa was reported in 2016 by Chan et al. In this study, HBeAg(+) patientswere treated with either Lambda (n=80) or PEG-IFN-alfa (n=83) for 48 weeks. A subset of on-treatment safety data is summarized in the table below. Lambdais generally better-tolerated when compared to PEG-IFN-alfa. Lower rates of flu-like symptoms and musculoskeletal symptoms were observed with lambdaversus PEG-IFN-alfa. LIMT HDV Monotherapy Phase 2 Clinical TrialThe LIMT HDV Phase 2 Clinical Trial is a 1:1 randomized, open-label study of Lambda 120 or 180 microgram subcutaneous injections administered weeklyfor 48 weeks in approximately 30 patients with chronic HDV. End of treatment will be followed by a treatment-free 24-week observation period. The primaryobjective of the Phase 2 Clinical Trial is to evaluate the safety, tolerability, and efficacy of treatment with two dose levels of Lambda monotherapy inpatients with chronic HDV infection. All patients will also be administered an anti-HBV nucleos(t)ide analog throughout the study. The trial will beconducted at international sites including New Zealand, Israel and Pakistan.Potential for Registration in HDV for LNF and LambdaOur goal in developing LNF and lambda is to reduce viral load in such a manner as to achieve durable clearance of the virus (sustained virologic response),the point where, upon withdrawal of the therapy, the infection does not return. Evidence that academic investigators have gathered suggests thatcombinations of LNF and lambda with other antiviral agents may hold promise for longer duration treatment and sustained, long-term reduction of viral load.We also believe that treatment with LNF and lambda in combination with other antiviral agents may contribute to long-term benefit for patients, which mayrepresent an alternative path to regulatory approval. In a study published in Plos One in 2014 (Romeo, R. et al. “High Serum Levels of HDV RNA ArePredictors of Cirrhosis and Liver Cancer in Patients with Chronic Hepatitis Delta,” Plos One, 2014; 9:1), high serum levels of HDV were found to be16 a predictor of cirrhosis and liver cancer development. In a study published in Gastroenterology in 2004 (Farci, P. et al. “Long-Term Benefit of InterferonTherapy of Chronic Hepatitis D: Regression of Advanced Hepatic Fibrosis,” Gastroenterol, 2004; 126:1740), researchers demonstrated that lower frequenciesof clinical events, leading to improvements in overall liver health and reductions in the rates of developing hepatic complications, could be achieved in HDVinfected patients who were treated with high dose IFN-alfa and who experienced biochemical response and sometimes as little as 2 log declines in viral load.A 2014 Hepatology study by Heidrich suggests that transient suppression of HDV replication in patients treated with PEG-IFN-alfa improves the clinicallong-term outcome, as not a single patient in their study with a post-treatment week 24 HDV RNA response experienced a clinical event, including thosepatients who experienced viral rebound. We believe that these studies suggest that eradication of HDV RNA may not be necessary in patients treated withIFNs to achieve a substantial clinical benefit and improve long-term outcomes.Exendin 9-39 for Post-Bariatric HypoglycemiaExendin 9-39 is the second most advanced product candidate in our pipeline. Exendin 9-39 is a glucagon-like peptide-1, or GLP-1, receptor antagonist. GLP-1 is a gut-derived incretin hormone released by intestinal “L” cells after meals. Incretin hormones, such as GLP-1, enhance the secretion of insulin frompancreatic beta cells in a glucose-dependent manner, thereby lowering blood glucose levels after meals. Exendin 9-39 blocks GLP-1 from binding to theGLP-1 receptor, inhibiting the GLP-1-mediated incretin effect. We are developing exendin 9-39 as a treatment for PBH, which is characterized by anexaggerated incretin response, with patients exhibiting low levels of glucose and excessively high levels of insulin in the blood after meals. This form ofhypoglycemia is a debilitating and potentially life-threatening condition. Gastric bypass procedures are widely performed and are increasing in frequency formedically complicated obesity. There is no approved therapy for PBH and the unmet medical need is high.Stanford researchers have demonstrated clinical proof of concept in 29 patients suffering from PBH that exendin 9-39 can prevent an exaggerated fall inblood sugar following a meal, or post-prandial hypoglycemia, in affected patients. Data has been generated using both intravenous delivery and SC delivery.Pharmacokinetics indicate that the SC delivery could enable once or twice a day pre-prandial dosing. Stanford initiated a Phase 2 multi-day dosing trial inaffected patients with our exendin 9-39 SC formulation in 2016. We have developed a novel liquid formulation for SC injection. We plan to initiate a Phase1 PK study in healthy volunteers and a Phase 2 study in affected patients using of the new SC formulation in 2017.Post-Bariatric Hypoglycemia OverviewAs the use of bariatric surgical procedures has increased worldwide, a new post-surgical complication, hypoglycemia associated with bariatric surgery, hasbeen increasingly diagnosed and reported in the procedures that involve reducing the size of the stomach with a vertical sleeve gastrectomy or by resectingand re-routing the small intestine to a small stomach pouch (Roux-en-Y gastric bypass). This disorder leads to frequent symptomatic hypoglycemia, oftenresulting in glucose concentrations low enough to cause seizures, altered mental status, loss of consciousness, cognitive dysfunction, disability and death.Quality of life can be severely diminished, and many patients cannot care for themselves or others, work, drive, or be left alone. There is no approvedtreatment for this condition. Severe cases have historically been surgically managed with near-total to total pancreatectomy, which results in insulindependent diabetes and is associated with a greater than 6% surgical mortality risk.Research suggests that elevated GLP-1 may play an important role in mediating the glucose-lowering effect associated with bariatric surgery. Surgically-altered nutrient transit, such as a Roux-en-Y procedure, causes early nutrient sensing by the intestinal “L” cells, resulting in enhanced secretion of GLP-1leading to elevated insulin secretion. This effect may play a primary role in the early resolution of Type 2 diabetes after surgery. A number of syntheticanalogs of GLP-1, or agonists, have been approved for the treatment of Type 2 diabetes including Byetta™ (exenatide), Victoza™ (liraglutide), andTrulicity™ (dulaglutide). These drugs, all agonists, bind to the GLP-1 receptor and enhance the release of insulin in a glucose-dependent manner. In patientswith PBH, excessive secretion of GLP-1 and/or exaggerated sensitivity to GLP-1 results in dysfunctional insulin release, leading to severe, debilitatinghypoglycemia. GLP-1 receptor antagonists compete with endogenous GLP-1 and has the potential to prevent dysfunctional insulin release and resultantsymptomatic hypoglycemia.17 Approximately 150,000 to 200,000 bariatric surgical procedures are performed each year in the United States, and another 125,000 are performed each yearin Europe. Approximately 30% of these bariatric surgeries are Roux-en-Y gastric bypass procedures.Our Solution: Exendin 9-39 to Treat Post-Bariatric HypoglycemiaExendin 9-39 is a well-characterized, competitive antagonist of GLP-1 at its receptor. Exendin 9-39 is a 31 amino acid fragment of exenatide, a commerciallyavailable GLP-1 agonist, brand named Byetta™ used in the treatment of type 2 diabetes. Exendin 9-39 blocks the GLP-1 receptor and leads to reduced post-prandial levels of insulin secreted by the pancreas. While exenatide has been approved for the treatment of type 2 diabetes, exendin 9-39, as a new molecularentity, has never been approved or commercialized for any indication.Clinical Data to DateStanford researchers have demonstrated in two clinical studies with exendin 9-39 that pharmacologic blockade of the GLP-1 receptor can preventhypoglycemia in affected patients and mitigate symptoms of hypoglycemia. A phase 2 multi-ascending dose trial is currently underway at Stanford. Webelieve that exendin 9-39 may represent the first targeted medical treatment for patients with PBH. In the two completed single-dose studies, there were noadverse drug reactions attributed to exendin 9-39. These single-dose Phase 1 studies were conducted under two investigator INDs for the study of exendin 9-39 for PBH at Stanford.The first exendin 9-39 study conducted at Stanford was a Phase 1, double-blinded crossover study wherein eight patients with PBH were randomly assignedto receive IV infusion of exendin 9-39 or placebo during an oral glucose tolerance test, or OGTT (Craig et al, Diabetologia 2016). The trial assessed patientblood glucose and insulin levels and the presence and severity of symptoms of hypoglycemia. Hypoglycemia was defined as glucose levels falling to orbelow 50 mg/dL.In this trial, IV infusion of exendin 9-39 raised the postprandial glucose nadir by over 70% and lowered the area under the curve insulin by 57%, normalizingboth parameters relative to healthy nonsurgical controls, and preventing hypoglycemia in all eight participants. In contrast, during placebo infusion everypatient became hypoglycemic, requiring investigator intervention with administration of IV dextrose when patient plasma glucose fell to a level of 50 mg/dLor less.To assess for the presence and severity of symptoms of hypoglycemia during IV infusion of exendin 9-39 versus placebo, patients completed severity-gradequestionnaires every 30 minutes during each 180 minute OGTT period. The severity-grade questionnaires showed that, on average patients experiencedfewer and less severe hypoglycemic symptoms during IV infusion of exendin 9-39 as compared to during IV infusion of placebo (p<0.001). While symptomsreported by subjects during the glucose rise (from T=0 to peak glucose) were unchanged by exendin 9-39 infusion, both autonomic (p=0.002) andneuroglycopenic (p=0.001) symptoms reported during the glucose fall period (from peak to nadir glucose) were reduced.The second clinical proof of concept study, a Phase 2 clinical trial, was a single ascending dose, or SAD. In this investigator-initiated study, conducted atStanford University School of Medicine, exendin 9‑39 was administered subcutaneously in eight patients with PBH. This was the first investigationinvolving the SC administration of exendin 9‑39 in human subjects and was designed to examine the PK, PD, and local tolerability of SC exendin 9‑39 inpatients with PBH. After metabolic and symptomatic responses to a baseline 75 g OGTT were evaluated, patients returned for a repeat OGTT withadministration of a single exendin 9‑39 dose, ranging from approximately 10–30 mg (0.13–0.38 mg/kg).18 In all eight patients undergoing the OGTT, exendin 9-39 administration prevented hypoglycemia and reduced symptoms of hypoglycemia. The baselineOGTT resulted in a high peak in plasma glucose concentration for all eight patients, followed by a rapid, steep decline, with all patients requiring rescue withIV dextrose at a plasma glucose concentration of 50 mg/dL. In contrast, prevention of hypoglycemia occurred at all dose levels of SC exendin 9-39 tested,with all patients completing the 180-minute OGTT without requiring intervention with IV dextrose. While early glycemic responses (fasting plasma glucose,peak postprandial glucose, time to peak glucose, and AUC glucose from 0–60 minutes postmeal) were unchanged by administration of SC exendin 9-39, lateglycemic responses (nadir glucose, time to nadir glucose, AUC glucose from 0–180 minutes) were significantly improved. The average nadir glucose wasincreased by 61%, as shown in the figure below.Exendin 9-39 SC Injection SAD Study Results *p < 0.01, **p < 0.001, and ***p < 0.0001for PBH patients with SC exendin 9-39 injection vs no injection.Source: Craig et al, ADA 2016.19 Symptoms of PBH were assessed using the Edinburgh Hypoglycemia Symptom Scale, which was completed by patients every 30 minutes during each 180-minute OGTT. Patients used the scale to report the presence and severity of autonomic or neuroglycopenic symptoms or symptoms of malaise. SC exendin 9-39 reduced symptoms of PBH overall and during the glucose fall period without altering symptoms during the glucose rise period. While symptomsassociated with PBH were observed during this study, no adverse reactions attributed to exendin 9-39 were identified, and no injection site reactions werereported in any patients in this study. P-value by paired two-tailed Student's t-test.Source: Craig et al, ADA, 2016b. A third trial conducted at Stanford under an investigator IND is currently underway. This is a Phase 2 trial evaluating the safety, efficacy, and PK profile ofmultiple ascending doses of subcutaneously administered exendin 9-39 in patients with PBH. Interim data from 11 patients participating in this trial asshown below have demonstrated a therapeutic increase in glucose nadir for patients who received doses ≥ 0.2 mg/kg during an OGTT on the final day ofdosing as compared to during a baseline OGTT. While all dose levels resulted in an improved mean percent increase in postprandial glucose nadir, patientswho received doses < 0.2 mg/kg required rescue with IV dextrose, whereas patients receiving doses ≥ 0.2 mg/kg did not require rescue with IV dextrose.Exendin 9-39 SC Injection MAD Study Interim Glycemic Results Source: Craig et al KOL/Analyst meeting, Dec 2016.20 The mean postprandial insulin peak was reduced by 51%, while fasting insulin was not raised, in patients who received doses of ≥ 0.2 mg/kg.Exendin 9-39 SC Injection MAD Study Interim Insulin Results Source: Craig et al KOL/Analyst meeting, Dec 2016.Ubenimex for Pulmonary Arterial HypertensionUbenimex is a well-characterized, oral, small-molecule inhibitor of leukotriene A4 hydrolase, or LTA4H, the enzyme responsible for converting leukotrieneA4, or LTA4, to leukotriene B4, or LTB4. LTB4 is a naturally occurring molecule involved in inflammation. Ubenimex has been marketed in Japan byNippon Kayaku for over 25 years as an adjunct to chemotherapy agents to extend survival and to maintain remission after treatment for acute non-lymphocytic leukemia in adults.Results of a preclinical study published in Science Translational Medicine (Tian, W. et al. “Blocking Macrophage Leukotriene B4 Prevents EndothelialInjury and Reverses Pulmonary Hypertension,” Sci Transl Med, 2013; 5:1) by Stanford researchers demonstrated that both LTB4 and LTA4H are elevated inanimal models of PAH and human PAH disease. Macrophages, a type of white blood cell that ingests foreign materials, accumulate around small arterioles ofthe lungs and synthesize excess LTB4. This causes programmed cell death, or apoptosis, of cells that line the interior surface of the pulmonary artery,pulmonary artery endothelial cells. Additionally, this causes proliferation and an increase in volume, or hypertrophy, of pulmonary arterial smooth musclecells. Elevated LTB4 causes inflammation resulting in blockage of the arteries, or arteriole occlusion, and hypertension in animal models of PAH. Targetedpharmacologic inhibition of LTB4, including ubenimex, reversed PAH disease in all treated animals; obstructed arterioles opened, cardiac functionimproved, and the animals survived. We therefore believe that ubenimex is a potential therapeutic candidate for treatment of PAH where pathologicalinflammation is believed to be important in the etiology of the disease.21 All currently approved agents for PAH were originally developed as vasodilators, drugs that dilate blood vessels. Inflammation is now recognized as aprimary component of PAH disease, which can lead to obstructed arterioles, vasoconstriction, and worsening cardiac function. Work published by Stanfordresearchers in Science Translational Medicine (Tian, W. et al. “Blocking Macrophage Leukotriene B4 Prevents Endothelial Injury and Reverses PulmonaryHypertension,” Sci Transl Med, 2013; 5:1) discusses a potentially novel therapeutic approach to PAH that may address the inflammatory component of PAHwith the potential for disease modification. We are currently conducting a Phase 2 clinical trial of ubenimex in patients with PAH, the LIBERTY Study, andexpect recruitment to be completed in the first half of 2017. We anticipate the completion of dosing in the LIBERTY Study by end of 2017 with data in early2018.Pulmonary Arterial Hypertension OverviewAbout Pulmonary Arterial Hypertension DiseasePAH is a type of high blood pressure that affects the arteries in the lungs and the right side of the heart. PAH begins when tiny arteries in the lungs, calledpulmonary arterioles, become narrowed, blocked or destroyed. This makes it harder for blood to flow through the lungs, and raises pressure within the arteriesin the lungs. As the pressure builds, the heart’s lower right chamber, or right ventricle, must work harder to pump blood through the lungs, causing the heartmuscle to weaken and eventually fail. PAH is a progressive, life-threatening illness that meets criteria for orphan drug designation in the United States,European Union, and Japan.Current Treatments for PAHInitial treatments developed and used for PAH focus on reduction of hypertension with agents such as diuretics, calcium channel blockers, increasing cardiacoutput with agents such as digoxin, and various anticoagulation therapies. These therapies are all generic agents. A number of therapies specificallyapproved for PAH, such as prostacyclin agonists, phosphodiesterase 5, or PDE5, inhibitors, guanylate cyclase stimulators, and endothelin receptorantagonists, target mechanisms that induce vasodilation. These therapies together represent approximately a $4 billion market in the United States andEurope. Prostanoids such as epoprostenol, treprostinil and iloprost are stable versions of vasodilators that are naturally produced by the body and helpcompensate for low levels of prostacyclin production in some patients. PDE5 inhibitors such as sildenafil and tadalafil also work as vasodilators by increasedsignaling through the nitric oxide pathway. Other stimulators of this pathway include guanylate cyclase stimulators such as riociguat. Endothelin is a naturalvasoconstrictor which binds to the endothelin receptors to elicit vasoconstriction. Antagonists of the endothelin receptor such as ambrisentan, bosentan, andmacitentan have been approved for the treatment of PAH. Despite their premium pricing, these drugs are all considered to be palliative and not disease-modifying. Specifically, these drugs do not address the underlying causes of the disease, especially in PAH patients with connective tissue diseases, or CTD,or PAH patients with inflammation, highlighting the need for novel therapeutic approaches. An estimated 30,000 PAH patients and 15,000 PAH patientsreceive pharmacologic therapy in the United States and Europe, respectively.22 Preclinical LTB4 Data in PAHIn animal models of PAH, LTB4 was significantly elevated in both broncho-alveolar lavage fluid and in serum, suggesting that LTB4 may play a key role indevelopment of the pathology associated with PAH. Significantly elevated levels of LTB4 were also observed in serum from PAH patients, with the highest levels in patients with systemic sclerosis-related PAH,or SSc-PAH, identifying a link between the pathology of the animal model of PAH disease and human PAH disease. 23 In animal models of PAH, right ventricular systolic pressure is greatly elevated and there is hypertrophy of the right ventricle 21 days after induction of thedisease. Treatment with ubenimex for 14 days reversed these effects, normalizing ventricular pressure and right ventricular size. The activity of ubenimex in this PAH animal model is more pronounced when overall survival is examined. All of the animals tested in this model thatreceived ubenimex survived until at least day 35, whereas none of the untreated animals survived. 24 Improvements in pressures and survival with ubenimex were seen in three distinct animal models of PAH disease: SU5416 induced-PAH in athymic rats,SU5416-induced PAH in hypoxia-induced PAH, and monocrotaline-induced PAH. Activity of ubenimex in treated animals correlated with LTB4 levels inthe model.Our Planned Solution: Ubenimex for PAHUbenimex is a well-characterized, oral, small-molecule, dual-inhibitor of aminopeptidase and LTA4H, the enzyme responsible for catalyzing the committedstep in the formation of the proinflammatory mediator LTB4. Ubenimex is approved in Japan as an adjuvant to chemotherapy agents to extend survival andto maintain remission after treatment for acute non-lymphocytic leukemia in adults. Ubenimex has been used for over 25 years in Japan and remainscommercially available through Nippon Kayaku. The FDA and EMA granted orphan drug designation to ubenimex for the treatment of PAH in the UnitedStates and Europe, respectively. Ubenimex is not approved for any indication in the United States or Europe.Clinical Data to Date and Clinical Development PlanWe in-licensed ubenimex from Nippon Kayaku in 2015 and have relied on Nippon Kayaku’s prior Phase 1 clinical data and experience with ubenimex tounderstand safety. Nippon Kayaku conducted four Phase 1 studies in healthy subjects and cancer patients to study metabolite determination, metabolism andexcretion, drug absorption, and a pharmacokinetic study in lymphoma patients.In the metabolite determination study, ubenimex was rapidly absorbed following oral administration of single doses ranging from 10 mg to 200 mg, reachinga maximum serum level between 30 minutes and three hours after dosing. Mean peak concentrations after 30 mg, 100 mg and 200 mg were 2.2 µg/mL at onehour, 2.5 µg/mL at three hours, and 7.4 µg/mL at two hours, respectively.In the metabolism and excretion study, 84% to 94% of the administered doses of ubenimex was recovered in urine within 24 hours of dosing.In the absorption study, prolonged administration of ubenimex to cancer patients showed rapid absorption of the drug and maximum peak levels whichranged from 30 minutes to three hours in most patients. In a small study of eight patients receiving 30 mg of ubenimex daily, delayed α-phase decrease, aninitial phase of rapid decrease of concentration of the drug in the plasma, was observed in patients with renal cancer compared to patients with bladdercancer, suggesting that clearance of ubenimex may be slower in patients with impaired renal function. The pharmacokinetics did not appear to change overtime with repeated administration of ubenimex.In a Phase 1b study performed in bone marrow transplant lymphoma patients in the United States, PK evaluation was performed in groups of ten patientsreceiving 10 mg of ubenimex QD, 30 mg of ubenimex QD, 30 mg of ubenimex three times a day, or TID, or 60 mg of ubenimex TID, in each case for up to 60days. The mean AUC and Cmax increased with increasing doses of 10 mg, 30 mg, 90 mg or 180 mg ubenimex daily. At all doses, no accumulation wasapparent over the six days.We completed a pre-IND meeting at FDA in May 2014 where we discussed both Phase 2 and Phase 3 clinical development plans for ubenimex in patientswith PAH. We subsequently filed an IND with FDA which became effective in September 2015. Our Phase 2 trial for ubenimex in PAH is called LIBERTY (ARandomized, Double-BLInd, Placebo-Controlled Study of uBEnimex in Patients with PulmonaRy ArTerial HYpertension) and is planned to enroll a total ofapproximately 45 patients with PAH in multiple centers. The trial will assess activity of ubenimex combined with standard of care treatment for PAH versusplacebo combined with standard of care treatment for PAH. The primary endpoint will be a measure of change in pulmonary vascular resistance, or PVR, withsecondary endpoints based on hemodynamic changes and exercise tolerance tests, including a six minute walk. Based on the proposed mechanism of actionof ubenimex as a potential anti-proliferative, anti-inflammatory and disease modifying agent, dosing in the LIBERTY trial will be six months, which webelieve will be sufficient time to demonstrate activity. First patient was dosed in LIBERTY in July 2016. We anticipate 6 months dosing to be completed byend of 2017.25 Ubenimex for LymphedemaA study conducted at Stanford demonstrated that LTB4 is elevated in both animal models of lymphedema and human lymphedema. Elevated LTB4 isassociated with tissue inflammation and impaired lymphatic function. Targeted pharmacologic inhibition of LTB4 promotes physiologic lymphatic repairand reverses lymphedema disease in treated animals.Researchers at Stanford demonstrated a novel function of LTB4 in the pathogenesis of lymphedema suggesting that blocking the effects of LTB4 may be apromising and potentially safe new therapeutic strategy for this disease. We intend to conduct a clinical study to explore if blocking the effects of LTB4 maybe useful as a new treatment for lymphedema.Lymphedema Disease OverviewAbout LymphedemaLymphedema is the build-up of fluid in soft body tissues when the lymph system has been damaged or blocked. It is characterized by swelling due toabnormal transport of lymphatic fluid and thickening or hardening of the skin in affected areas. As fluid builds up, swelling occurs, usually in an arm or a leg,but can also affect other parts of the body. Lymphedema often causes long-term physical, psychological and social problems for patients and significantlyimpacts quality of life. There are currently no approved pharmacological treatments for lymphedema and the unmet medical need is high.Lymphedema can be either primary, meaning it is congenital or occurs on its own, or secondary, meaning it is caused by another disease or condition.Primary lymphedema is caused by the absence of certain lymph vessels at birth or by abnormalities in the lymphatic vessels. It can be divided into threeforms, depending on age of onset. The prevalence of primary lymphedema is less than 200,000 in the United States and less than 5 in 10,000 in the EuropeanUnion, and expected to be eligible for orphan drug designation by regulatory authorities. Secondary lymphedema usually develops as a result of a blockageor interruption that alters the flow of lymph through the lymphatic system and can develop from an infection, malignancy, surgery, scar tissue formation,trauma, radiation, or other cancer treatment.Primary lymphedema and secondary lymphedema can both be debilitating disorders with negative impact on quality of life and a large unmet medical needexists for an effective therapy. There is no approved pharmacologic treatment for lymphedema. Available treatments include compression garments, massageand exercise. Several agents such as coumarin have been tested in investigator-initiated clinical trials but have shown no clinical efficacy.26 Preclinical LTB4 Data in LymphedemaAn animal model of lymphedema was used to mimic the physiological changes seen in lymphedema patients. In this model, acquired lymphedema wassurgically induced in the tails of mice through the ablation of lymphatic trunks. As the tail volume increases, there is an accumulation of fibroblasts, fat cellsand skin cells in the tail, and poor clearance of immune cells from the tail. As lymphedema is established in this model, the levels of LTB4 in serum risesignificantly. For surgical controls (sham animals), skin incision alone was performed without lymphatic cautery. Normal controls did not go under anysurgical manipulation. When serum from human lymphedema patients was examined, the LTB4 levels were also significantly (p<0.0001) elevated comparedto normal controls (control n=18, lymphedema patients n=8). In animal models, ubenimex significantly reduced tail volume (p<0.0001, sham n=13, saline n=14, ubenimex n=14). Sham surgery (placebo surgery) is afaked surgical intervention that omits the step thought to be therapeutically necessary. In clinical trials of surgical interventions, sham surgery is animportant scientific control. This is because it isolates the specific effects of the treatment as opposed to the incidental effects caused by anesthesia, theincisional trauma, pre- and postoperative care, and the patient’s perception of having had a regular operation. Thus, sham surgery serves an analogouspurpose to placebo drugs, neutralizing biases such as the placebo effect. 27 Ubenimex reversed lymphedema-induced tissue remodeling in animal models. Thickness of both the epidermis and dermis were reduced. Our Planned Solution: Ubenimex for LymphedemaClinical PlanWe in-licensed ubenimex from Nippon Kayaku in 2015 and have relied on Nippon Kayaku’s prior Phase 1 clinical data and experience with ubenimex tounderstand safety. We submitted a U.S. IND in January 2016 for ubenimex in lymphedema. We filed an additional IND for ubenimex in lymphedema withFDA in December 2015. Our Phase 2 clinical proof of concept trial for ubenimex in lymphedema is called ULTRA (Ubenimex Lymphedema Trial to RestoreActivity). The trial is expected to enroll approximately 40 patients at Stanford with a goal to assess activity of ubenimex versus placebo. The primaryendpoint is a measure of change in skin fold thickness from baseline. Secondary endpoints include change in limb volume from baseline and patient reportedoutcomes, including quality of life. Based on the proposed mechanism of action of ubenimex, as a potential anti-proliferative and a potential diseasemodifying agent, dosing in the planned trial is expected to be six months, which we believe represents sufficient time to demonstrate activity. First patientwas dosed in July 2016. We plan to complete enrollment during the second half of 2017.ManufacturingWe currently contract with third parties for the manufacturing of all of our product candidates for preclinical and clinical studies and intend to do so in thefuture. We do not own or operate manufacturing facilities for the production of clinical trial quantities of our product candidates and have no plans to buildour own clinical or commercial scale manufacturing capabilities. We believe that the use of contracted manufacturing organizations, or CMOs, eliminates theneed for us to directly invest in manufacturing facilities and equipment and additional staff. Although we rely on contract manufacturers, our personnel andconsultants have extensive manufacturing experience overseeing our CMOs.To date, our third-party manufacturers have met the manufacturing requirements for the product candidates. We expect third-party manufacturers to becapable of providing sufficient quantities of our product candidates to meet anticipated full scale commercial demands but have not assessed thesecapabilities beyond the supply of clinical material. We plan to identify commercial contract manufacturers as we move our product candidates to Phase 3clinical trials. We believe there are alternate sources of manufacturing that could be identified and enabled to satisfy our clinical and commercialrequirements, however, we cannot be certain that identifying and establishing alternative relationships with such sources can be successful, cost effective, orcompleted on a timely basis without significant delay in the development or commercialization of our product candidates.28 Lonafarnib (LNF)The drug product for completed LNF Phase 2 clinical studies for the treatment of HDV was manufactured by Merck. We have successfully completed thetechnology transfer for manufacture of the LNF drug substance and the LNF drug product to our third-party manufacturers. All future clinical trials will beconducted with product manufactured by these CMOs.PEGylated Interferon Lambda (Lambda)We have completed the technology transfer from the licensor, BMS for our PEGylated Interferon Lambda product. As part of the license agreement, sufficientinventory of drug substance and drug product was obtained to complete our Phase 2 and initiate our Phase 3 clinical trials. We have initiated start-upactivities at a new drug product facility and expect to complete the first GMP campaign in 2017. The drug substance CMO remains the same CMO contractedby BMS and no changes are anticipated for the drug substance manufacturing process.Exendin 9-39The drug product for exendin 9-39 for the treatment of PBH for Phase 2 clinical studies is manufactured by a third-party CMO.UbenimexNippon Kayaku manufactures the drug substance and drug product for ubenimex Phase 2 clinical studies for the treatment of PAH and lymphedema. We arein the process of transferring the drug substance process from Nippon Kayaku to our CMO. We have successfully manufactured a new formulation for thedrug product which is intended to improve dosing compliance and reduce capsule burden. This new formulation will be introduced into our Phase 2 OpenLabel Extension for PAH and ultimately the Phase 3 clinical trial and commercial materials.Intellectual PropertyWe strive to protect those proprietary technologies we believe are important to our business. We seek and maintain, where available, patent protection for ourproduct candidates including: composition of matter, method(s) of use, and process patents covering manufacture and/or formulation. We have also licensedpatents and patent applications that cover certain of our product candidates and/or their manufacture, use, or formulation.We also rely, or plan to rely, on regulatory exclusivity, including orphan drug designation and New Chemical Entity (NCE) and Biologic LicenseApplication (BLA) exclusivities, as well as trade secrets and carefully monitor our proprietary information to protect all aspects of our business.We plan to continue to expand our intellectual property portfolio by filing patent applications on new dosage forms, methods of treatment, and compositionsof matter for our product candidates. We file and prosecute patent applications in the United States and Europe, and when appropriate, additional countries,including Japan, Korea and China.Our success will depend significantly upon our ability to: (i) obtain and maintain patents and other exclusivity protections for commercially importanttechnology, inventions and know-how related to our business; (ii) prosecute our patent applications to issue as patents and defend and enforce our patents;(iii) maintain our licenses to use intellectual property owned by others; (iv) preserve the confidentiality of our trade secrets, and (v) operate withoutinfringing the valid and enforceable patents and other proprietary rights of others. In addition to maintaining our existing proprietary assets, we seek tostrengthen our proprietary positions when economically reasonable to do so. Our ability to augment our proprietary position relies on its: (i) know-how;(ii) ability to access technological innovations, and (iii) ability to in-license technology when appropriate.The patent positions of pharmaceutical/biotechnology companies like us are generally uncertain and involve complex legal, scientific, and factual issues. Inaddition, the scope claimed in a patent application can be significantly reduced during the patent prosecution process before any patent issues. After issuanceof a patent, if the29 issued patent is challenged, then the courts can redefine the scope of the patent, including by invalidating some or all of the patent claims, or rendering thepatent unenforceable in its entirety. Consequently, we do not know with certainty whether patents will issue in each country where we or our licensors filepatent applications, or if those patent applications, if ever issued, will issue with claims that cover our product candidates, or, even if they do issue, whetherthe patent or its relevant claims will remain enforceable upon challenge. Accordingly, we cannot predict with certainty whether the patent applications we arecurrently pursuing will issue as patents in a particular jurisdiction or whether the claims of any issued patents will provide sufficient proprietary protectionfrom potential competitors to make any of our products commercially successful. Any of our patents, including already issued in-licensed patents or anypatents that may issue to us or our licensors in the future, could be challenged, narrowed, circumvented, or invalidated by third parties. Newly filed patentapplications in the United States Patent and Trademark Office, or the USPTO, and certain other patent offices are maintained in secrecy for a minimum of 18months, and publications of discoveries in the scientific or patent literature often lag far behind the actual discoveries themselves. Further, the date of aninvention is typically not publicly disclosed. For these reasons, we cannot be certain that inventions claimed in pending patent applications were notinvented by another party prior to our invention, or claimed in a patent application filed before the effective filing date of our applications, in either of whichcase the claims may not be patentable to us. For certain applications with an effective filing date prior to March 13, 2013, we may have to participate ininterference proceedings declared by the USPTO to determine priority of invention. Also, while we are not currently participating in any interferences or post-grant challenge proceedings, such as patent oppositions, post-grant reexamination proceedings, inter parties review proceedings and patent litigation, thatseek to invalidate claims of pending patent applications or issued patents, we may have to participate in such proceedings in the future. Such proceedingscould result in substantial cost, even if the eventual outcome is favorable to us.The term of individual patents depends upon the legal term of the patents in the countries where they are issued. In most countries, the standard patent termfor inventions relating to human drugs and their formulation and use is 20 years from the date of filing the first non-provisional patent or internationalapplication under the Patent Cooperation Treaty of 1970, or the PCT.Patent Protection of Our Product CandidatesOur product candidates and/or their uses in one or more indications of interest to us are covered by in-licensed patents and patent applications and by ourown patent applications.Lonafarnib (LNF). We have in-licensed from Merck a portfolio of patents covering the compound, formulations of the compound, and synthesis, but theseexpire before the anticipated launch date of the LNF product candidate. We have a PCT application that claims the use of LNF in combination with RTVand/or optionally other drugs for the treatment of HDV infection that has matured into patent applications in at least the United States, the European PatentOffice, or the EPO, Japan, Korea and China. Any patents that issue from this these applications will expire in 2035, but a patent term extension (as describedbelow) of up to 5 years is available in the United States, and we expect LNF to be eligible for this additional protection. In addition, we expect LNF to beeligible for NCE status, and LNF has been granted orphan drug designation by the FDA and the EMA in this indication, which respectively provide five,seven and ten years of regulatory exclusivity.We have filed two additional PCT applications, one relating to methods for treating HDV with LNF in combination with Ritonavir and the other for thecombination drug products useful in such methods. The PCT is an international patent law treaty that provides a single PCT application can be convertedinto a patent application in any of the more than 145 PCT contracting states, providing a cost-effective means for seeking patent protection in numerousregions or countries. Conversion of a PCT application into an application in any of the contracting states typically occurs about 30 months after a priorityapplication is filed, or about 18 months after the PCT application filing date. An applicant must undertake prosecution within the allotted time in the patentoffices of any, or a combination, of the contracting states or in a regional patent office it determines to undertake patent issuance in protection in suchcountry or territory. We have not yet determined the countries in which we will pursue potential patent protection from this PCT application, but even if wedetermine to make such filings, our efforts may not result in the issuance of patents as a result.30 Pegylated interferon-lambda (Lambda). We have in-licensed from BMS a portfolio of patents relating to the manufacture, use, and compositions ofinterferon Lambda modified by polyethylene glycol derivatization (Lambda). The key United States composition of matter patent in this portfolio expires in2025, but we expect to be eligible for the full 5 years of patent term extension for that patent. In addition, we expect Lambda to be filed under a BLA and soLambda would be eligible for 12 years reference product exclusivity (4 years in filing exclusivity; 12 years for data), as well as orphan drug exclusivity inthis indication. We also filed a PCT application relating to the use of Lambda in HDV.Exendin 9-39. We have in-licensed from Stanford two PCT applications that claim the use of exendin 9-39 and other agents in the treatment of hypoglycemiaassociated with bariatric surgery, including in PBH. Any patents that issue from these PCT applications will expire in 2036 without extension and will beeligible for patent term extension of up to 5 years is available in the United States. Exendin 9-39 to be eligible for orphan drug designation exclusivity in thisindication, which as noted above provides seven years and twelve years of regulatory exclusivity in the United States and Europe, respectively.Ubenimex.PAH. We have in-licensed from Stanford issued U.S. Patent No. 9,233,089 and a corresponding pending EPO application that claim the use of ubenimex andother agents in the treatment of PAH; a continuation application of the U.S. patent is also pending. We have also in-licensed from Nippon Kayaku theexclusive right outside Asia to access its regulatory dossier for ubenimex, which we believe to be a significant competitive advantage. U.S. PatentNo. 9,233,089 (and from any patent that issues in the EPO or from any U.S. continuation) will expire in 2033. The U.S. patent may be eligible for patentextension of up to 5 years in the United States. Ubenimex is eligible for orphan drug designation exclusivity in this indication.Lymphedema. We have also in-licensed from Stanford a PCT application that claims the use of ubenimex and other agents in the treatment of lymphedema.This PCT is not due for nationalization until 2017, and if nationalized and issued, any patents that result from this PCT filing would expire in 2036. Any USpatent may be eligible for patent extension of up to 5 years in the United States.Regulatory Exclusivity and Patent Term Extension. If ubenimex is approved in any indication, it would be entitled to NCE exclusivity, which would providefor five years of regulatory exclusivity for the approved product. In addition, the FDA has granted orphan drug designation to ubenimex for the treatment ofPAH, and we are seeking orphan drug designation for ubenimex for the treatment of lymphedema. Orphan drug designation, if obtained, may provide sevenyears of regulatory exclusivity for each indication upon NDA approval. However, patent term extension, as described below, will be available only for thefirst of the two indications to be approved.Patent TermIn the United States, the patent term for an FDA-approved drug may be eligible for a patent term extension, or a PTE. The Hatch-Waxman Act of 1984 permitsrestoration of a portion of the patent term of a U.S. patent as compensation for the patent term lost during product development and the FDA regulatoryreview process if approval of the application for the product is the first permitted commercial marketing of a drug or biological product containing the activeingredient. The length of the PTE is based on the length of time it takes for the drug to complete the pre-market regulatory approval requirements. The timerequired for approval of a NDA or BLA and 50% of the time spent in testing phase, reduced by any periods of lack of diligence, are credited up to a maximumfive year extension. The PTE cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval. Only one patent perapproved drug may be extended and a patent can only be extended once; thus, even if a single patent is applicable to multiple products, it can only beextended based on one product.Similar provisions to extend the term of a patent that covers an approved drug may be available in certain other foreign jurisdictions. For example, in Europe,a supplementary protection certificate (SPC), if granted, may extend certain patent rights for up to 5 years. In addition, in Europe, marketing approvalobtained through the European Medicines Agency (EMA) may provide a period of ten years of regulatory data exclusivity from the time of approval. Whenpossible, depending upon the length of clinical trials and other factors involved in the filing of NDAs and BLAs for our products, we expect to apply forpatent term extension for patents covering our product candidates and their methods of use both in the United States and any foreign jurisdiction whereavailable. There is no guarantee, however, that the applicable authorities will agree to grant extensions, and if granted, what the length of those extensionswill be.31 Other Proprietary Rights and ProcessesWe also rely on trade secret protection for some of our confidential and proprietary information. It is our policy to require our employees, consultants, outsidescientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment orconsulting relationships with us. These agreements provide that all confidential information concerning our business, scientific, development or financialaffairs that are either developed or made known to the individual during the course of the individual’s relationship with us are to be kept confidential and notdisclosed to third parties except in specific circumstances. Although we take steps to protect our proprietary information and trade secrets, including throughcontractual means with our employees and consultants, third parties may independently develop substantially equivalent proprietary information andtechniques or otherwise gain access to our trade secrets and disclose our technology. If these events happen, we may not be able to meaningfully protect ourtrade secrets.Our agreements with employees also provide that all inventions conceived by the employee in the course of employment with us or based on the employee’suse of our confidential information are our exclusive property or that we have an exclusive royalty free license to use such technology.CompetitionThe biopharmaceutical industry is highly competitive. We face competition from major pharmaceutical companies, specialty pharmaceutical companies andbiotechnology companies worldwide. Given the significant unmet medical need for novel therapies to treat chronic hepatitis delta infection, post-bariatricsurgery-induced hypoglycemia associated with bariatric surgery, PAH and lymphedema, these conditions are where various treatments from many companiesare used and where many public and private universities and research organizations are actively engaged in the discovery, research and development ofproduct candidates. As a result, there are and will likely continue to be extensive resources invested in the discovery and development of new products totreat these unmet medical needs. We anticipate facing intense and increasing competition as new products enter the market and advanced technologiesbecome available.In addition, there are numerous multinational pharmaceutical companies and large biotechnology companies currently marketing or pursuing thedevelopment of products or product candidates targeting the same indications as our product candidates. Many of our competitors, either alone or withstrategic partners, have or will have substantially greater financial, technical and human resources than us. Accordingly, our competitors may be moresuccessful than us in developing or marketing products and technologies that are more effective, safer or less costly. Additionally, our competitors mayobtain regulatory approval for their products more rapidly and may achieve more widespread market acceptance. Accelerated mergers and acquisitionsactivity in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among a smaller number of ourcompetitors. These companies also compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical studysites and patient registration for clinical studies and acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.Our potential competitors and the related stage of development of their product candidates in target indications is as follows: •Hepatitis delta virus: Replicor, Inc. (Phase 2), Hepatera Ltd (Phase 2) and Alnylam Pharmaceutical, Inc. (preclinical); •Hypoglycemia associated with bariatric surgery: Xoma Corporation (Phase 2); •Pulmonary arterial hypertension: Reata Pharmaceuticals, Inc. (Phase 2), Arena Pharmaceuticals (Phase 2), and United TherapeuticsCorporation (Phase 1); •Lymphedema: Novartis (Phase 2).There are other therapies that are used or may be used for our targeted indications, however, we do not believe that these therapies are potentially curative forour targeted indications. For example, there are a number of therapies used for symptomatic relief of PAH such as calcium channel blockers and diuretics aswell as vasodilators. Other32 products in clinical development or marketed for other indications may be used in competition with our product candidates if we are able to identifypotential market opportunities of interest. For example, HDV has not been generally identified as a target for development compared to hepatitis B orhepatitis C, and products on the market or in development for those indications may potentially be tested in HDV as the understanding of the potentialmedical need for therapies in this indication become more widely understood.We believe that the key competitive factors that will affect the development and commercial success of our product candidates are efficacy, safety andtolerability profile, convenience in dosing, product labeling, cost-effectiveness, price, the level of generic competition and the availability of reimbursementfrom the government and other third-parties. Our commercial opportunity could be reduced or eliminated for any of our products if our competitors haveproducts that are approved earlier than our product candidates or are superior compared to our product candidates or if our product candidates do not result inan improvement in condition compared to those other products.License and Asset Purchase AgreementsLicense Agreement with MerckIn September 2010, we entered into an exclusive license agreement with Schering Corporation, subsequently acquired by Merck & Co., Inc., or Merck, whichprovides us with the exclusive right to develop and commercialize lonafarnib. As consideration for such exclusive right, we issued Private Eiger convertiblepreferred stock with a fair value of $0.5 million when the agreement was executed in September 2010. This preferred stock was converted to 27,350 shares ofcommon stock upon the Merger. In addition, we are obligated to pay Merck up to an aggregate of $27.0 million in development milestones and will berequired to pay tiered royalties based on aggregate annual net sales of all licensed products ranging from mid-single to low double-digit royalties on netsales. Our obligation to pay royalties to Merck expires on a country-by-country and product-by-product basis on the later of the expiration of the last toexpire patent assigned to us under the agreement, which is estimated to be in December 2016; or on the tenth anniversary of the first commercial sale of theproduct. In May 2015, the first regulatory milestone was achieved and we paid the related milestone payment of $1.0 million to Merck. The amount wasrecorded as a charge to research and development expense during the year ended December 31, 2015. No additional charges were recorded during the yearended December 31, 2016.The Merck License will continue for so long as we owe royalty payments to Merck under the agreement. Each party has the right to terminate the MerckLicense Agreement for the other party’s uncured material breach or bankruptcy. Merck also has the right to terminate the agreement if we discontinuedevelopment and commercialization of LNF for a specified period of time. In addition, we have the right to terminate the agreement, with notice, for anyreason.Asset Purchase Agreement with Eiger Group International, Inc.In December 2010, we entered into an Asset Purchase Agreement with Eiger Group International, Inc., or EGI, dated December 8, 2010, or the EGI APA.Dr. Jeffrey Glenn is the sole owner of EGI.Under the EGI APA, we purchased all the assets including intellectual property rights related to the use of farnesyl transferase inhibitors as anti-viral agentsand methods to treat viral infection with those inhibitors. We also purchased all assets including intellectual property rights related to the use of inhibitors ofprenylation, prenyl cysteine methyltransferase, and a specified protease as anti-viral agents and methods to treat viral infection with those inhibitors. We areobligated to use commercially reasonable efforts to develop and commercialize the licensed products in major markets.Under the EGI APA, we paid EGI an upfront payment of $0.4 million. Additionally, we are obligated to pay EGI a low single-digit royalty based on aggregateannual net sales of products developed using the intellectual property. Within the first ten years after commercialization, we may make a one-time payment of$0.5 million for each contract for the three types of product related to such intellectual property that would reduce the payment term for the three products tothe tenth anniversary of the first commercial sale. The obligation to pay royalties expires on a country-by-country and product-by-product basis on the laterof either when the product is no longer sold in any country or the earliest of the tenth anniversary of the first commercial sale of the product.33 The term of the EGI APA extends until expiration of all payment obligations, and we may terminate the agreement upon notice to EGI. EGI may terminate theEGI APA if we fail to use commercially reasonable efforts to develop and commercialize licensed products. In addition, each party may terminate the EGIAPA for the other party’s uncured material breach or bankruptcy. In the event of any termination, other than termination by us for EGI’s breach, we will assignthe purchased assets back to EGI.In November 2012, we entered into an agreement with EGI whereby we sold all of the assets related to the compound clemizole, including any relatedintellectual property. EGI is obligated to pay to us a high single-digit royalty on future aggregate annual net sales, subject to certain reductions andexceptions. EGI’s obligation to pay royalties expires on a country-by-country and product-by-product basis on the later of either expiration of the last toexpire patent sold to EGI under the agreement or the earliest of the tenth anniversary of the first commercial sale of the product.License Agreement with Janssen Pharmaceutica NVIn December 2014, we, through our wholly-owned subsidiary EB Pharma, LLC, or EBP, entered a License Agreement, or the Janssen License Agreement, withJanssen Pharmaceutica NV, or Janssen, dated December 19, 2014.Under the Janssen License Agreement, Janssen granted us an exclusive, worldwide, license to develop, manufacture, and sell products containing thecompound tipifarnib for all therapeutic and diagnostic uses in humans, including any such uses for human virology diseases, but excluding oncologydiseases.We are responsible for the development of at least one product in a major market country and for commercialization of products in all countries wherenecessary authorization is obtained, both at our cost and expense. We may manufacture, develop, and commercialize the products itself or we may grant oneor more sublicenses for such purposes. However, for a period of time following completion of the proof of concept trial, Janssen has a first right of negotiationfor an exclusive license back from us to develop and commercialize tipifarnib in any country in the world.Under the Janssen License Agreement, we are obligated to make development milestone payments in aggregate of up to $38.0 million, sales milestonepayments in aggregate of up to $65.8 million, and pay a tiered royalty, ranging from the mid single to low double digits, based on aggregate annual net salesof all licensed products. If we grant a sublicense, we are obligated to pay Janssen a portion of the sublicensing income received. As of December 31, 2016, theproduct has not reached commercialization and no milestones have been paid.The Janssen License Agreement will continue for so long as we owe royalty payments to Janssen under the agreement or for so long as there is a valid patentclaim under the agreement, whichever is longer. Both parties have the right to terminate the agreement for the other party’s uncured material breach of theagreement or for the other party’s bankruptcy. Janssen also has the right to terminate the agreement if we fail to meet certain specified diligence obligations.In addition, we have the right to terminate the agreement without cause at any time.License Agreement with Nippon Kayaku Co., Ltd.In May 2015, Eiccose, LLC, or Eiccose, and Nippon Kayaku Co., Ltd, or NK, entered into a License Agreement, or NK License, dated May 1, 2015 pursuantto which NK granted Eiccose an exclusive license to develop, manufacture, and sell ubenimex outside certain identified Asia countries, including Japan, forthe treatment of PAH and other inflammatory disease involving leukotriene B4. Eiccose assigned the NK License to us as part of the Eiccose asset purchasedescribed below.Under the NK License, we are responsible for the development and commercialization of ubenimex in our territory at our cost and expense. We will purchaseubenimex for development and commercial use from NK at agreed transfer prices under a separate supply agreement, but we have the option to manufactureand supply the product for Phase 3 studies and/or commercial use. If we exercise the manufacturing option, NK will transfer the manufacture of the product tous or our contract manufacturer, at our cost and expense, and we will pay NK a running, mid single-digit royalty on the net sales of ubenimex sold in ourterritory or, if the parties agree, a lump-sum payment, for the use of NK’s manufacturing know-how.34 Under the NK License, we also granted back to NK an exclusive license to develop, manufacture, and sell ubenimex for the treatment of PAH and otherinflammatory disease involving leukotriene B4 in the Asia countries comprising the NK territory. NK is responsible for the development andcommercialization of ubenimex in the licensed indications in its territory at its own cost and expense. NK will pay us a running, mid single-digit royalty onnet sales of ubenimex in the specified indications in NK’s territory.The NK License Agreement will continue for so long as the parties and their sublicensees continue to develop and commercialize ubenimex for the treatmentof PAH and other inflammatory disease involving leukotriene B4. Both parties have the right to terminate the agreement for the other party’s uncuredmaterial breach, and NK also has the right to terminate the agreement if we fail to meet certain specified diligence obligations. In addition, the parties mayterminate the agreement if further development of the product is commercially, financially, or otherwise not advisable.Asset Purchase Agreement with Tracey McLaughlin and Colleen CraigIn September 2015, we entered into an Asset Purchase Agreement with two individuals, Dr. Tracey McLaughlin and Dr. Colleen Craig, or the Sellers, datedSeptember 25, 2015, or the Exendin APA. We also entered into a consulting agreement with the Sellers as part of the agreement.Under the Exendin APA, we purchased all the assets and the intellectual property rights related to the compound exendin 9-39 from the Sellers, including anassignment of a license agreement with Stanford which covered exclusive rights with respect to the compound exendin 9-39. Under the assigned Stanfordexclusive license agreement, we are obligated to pay Stanford a low, single-digit royalty on net sales after the first commercial sale of any product developedbased on exendin 9-39.Under the Exendin APA, we are obligated to pay a development milestone payments in aggregate up to $1.0 million to each of the Sellers and a low, single-digit royalty based on aggregate annual net sales of all products developed based on exendin 9-39 subject to certain reductions and exceptions. Ourobligation to pay royalties expires on the expiration of the last to expire patent assigned to us under the agreement. We also agreed to retain each of theSellers pursuant to a consulting agreement with a term of one year, subject to annual renewal. The consulting agreement with Dr. Tracey McLaughlin wasextended during the year ended December 31, 2016. The consulting agreement with Dr. Colleen Craig was not extended during the year ended December 31,2016. As of December 31, 2016, the product has not reached commercialization and no milestones have been paid.Asset Purchase Agreement with Eiccose, LLCIn October 2015, we entered into an asset purchase agreement with Eiccose, LLC., or Eiccose, whereby Eiccose sold all of the assets related to the treatment ofpulmonary arterial hypertension, or PAH, treatment of lymphedema and products containing ubenimex for the treatment of disorders involving LTB4, andany related intellectual property to us (the “Eiccose APA”). David Cory, the President, Chief Executive Officer and director of ours, is the sole managingmember and significant equity interest holder of Eiccose. We made a payment to Eiccose of $0.1 million representing reimbursement of certain previouslyincurred expenses, including payments and accrued amounts owed to Stanford in connection with the license agreement for the treatment of Lymphedemaand the license agreement for the treatment of PAH. The Eiccose APA also provided that, upon a next round of financing pursuant to which we sold shares ofcapital stock resulting in gross proceeds of at least $25.0 million, we would issue to Eiccose fully vested shares of our common stock equal to 1.75% of thetotal number of our outstanding capital stock, before Merger. In October 2015, we recorded $1.5 million in research and development expenses and acorresponding liability representing the fair value of our obligation to issue common stock to Eiccose.On March 22, 2016, we issued to Eiccose 96,300 fully vested shares of common stock pursuant to the terms of the Eiccose APA. In connection with thistransaction we remeasured the fair value of the obligation to issue common stock at the settlement date and the change in fair value of $0.2 million wasrecognized within other expense, net in the consolidated statement of operations during the year ended December 31, 2016. Upon the settlement of theobligation with the issuance of shares on March 22, 2016, the liability was reclassified to common stock and additional paid-in capital within stockholders’equity.35 We are also obligated to pay to Eiccose an aggregate of up to a maximum of $10.0 million of commercial milestones in connection with future sales of the product and royalties in the low single-digits based on aggregate annual net sales following the first commercial sale of any product. As of December 31, 2016,the product has not reached commercialization and no milestones have been paid.Exclusive Agreement with the Board of Trustees of the Leland Stanford Junior University—LymphedemaIn October 2015, as part of the assets we purchased from Eiccose, we acquired and were assigned an Exclusive Agreement, or the Stanford LymphedemaAgreement, between Eiccose and the Board of Trustees of Stanford dated October 27, 2015.Under the Stanford Lymphedema Agreement, Stanford granted us an exclusive, worldwide license under specified patent rights related to the treatment oflymphedema, to manufacture, use, and sell products covered by the licensed patents for all uses.We are responsible for the development and commercialization of any products under the license at our cost and expense, and are obligated to usecommercially reasonable efforts to achieve certain specified milestones. In consideration of the license, we paid to Stanford a low, single-digit equity interestand are obligated to make development and commercial milestone payments in aggregate of up to $0.5 million as well as a low, single-digit royalty on netsales of any products. As of December 31, 2016, the product has not reached commercialization and no milestones have been paid.Stanford may terminate the agreement for our uncured material breach or bankruptcy. Stanford also has the right to terminate the agreement if we fail todevelop and commercialize products in accordance with certain specified diligence obligations. We have the right to terminate the agreement without causeat any time.Exclusive Agreement with the Board of Trustees of the Leland Stanford Junior University—PAHIn October 2015, as part of the assets we purchased from Eiccose, we also acquired an Exclusive Agreement between Eiccose and Stanford, dated May 1,2015, or the Stanford PAH Agreement.Under the Stanford PAH Agreement, Stanford granted us an exclusive, worldwide license under specified patent rights related to the treatment of PAH andimproved right ventricle function, to manufacture, use, and sell products covered by the licensed patents for all uses. Stanford and other non-profit researchinstitutions retain the right to practice under the licensed patents for any non-profit purpose.We are responsible for the development and commercialization of the products at our cost and expense, and are obligated to use commercially reasonableefforts to achieve certain specified milestones. We may satisfy these requirements our self, through our affiliates, or through granting one or more sublicenses.We are obligated to give Stanford a low, single-digit equity interest, make development and commercial milestone payments in aggregate of up to $0.5million, and pay a low, single-digit royalty on net sales of the products. If we grant a sublicense, we will pay Stanford a portion of the sublicensing incomereceived.Stanford may terminate the agreement for our uncured material breach or bankruptcy. Stanford also has the right to terminate the agreement if we fail todevelop and commercialize products in accordance with certain specified diligence obligations. We have the right to terminate the agreement, with notice,for any reason.License Agreement with Bristol-Myers Squibb CompanyIn April 2016, we entered into a License Agreement, or the BMS License Agreement, and a Common Stock Purchase Agreement, or BMS PurchaseAgreement, with Bristol-Myers Squibb Company, or BMS, dated April 20, 2016.36 Under the BMS License Agreement, BMS granted us an exclusive, worldwide, license to research, develop, manufacture, and sell products containing theproprietary BMS molecule known as PEG-interferon Lambda-1a, or the Licensed Product, for all therapeutic and diagnostic uses in humans and animals.We are responsible for the development and commercialization of the Licensed Product at our sole cost and expense. In April 2016, under the BMS LicenseAgreement we paid an upfront payment of $2.0 million in cash and issued 157,587 shares of our common stock to BMS with an aggregate fair value of $3.2million. The BMS Purchase Agreement grants BMS certain registration rights with respect to the shares of common stock delivered, and BMS has agreed tocertain trading and other restrictions with respect to the shares purchased.Under the BMS License Agreement, we are obligated to make development and regulatory milestone payments totaling $61.0 million and commercial salesmilestones of up to $128.0 million after the achievement of specified milestones. We are also obligated to pay BMS annual net sales royalties in the range ofmid-single to mid-teens, depending on net sales levels. If we grant a sublicense, we are obligated to pay BMS a portion of the sublicensing income received.As of December 31, 2016, the product has not reached commercialization and no milestones have been paid.Government Regulations and Product ApprovalsGovernment authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things, the research,development, testing, manufacture, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, import and export ofpharmaceutical products such as those we are developing. The processes for obtaining regulatory approvals in the United States and in foreign countries,along with subsequent compliance with applicable statutes and regulations, require the expenditure of substantial time and financial resources.FDA Approval ProcessAll of our current product candidates are subject to regulation in the United States by the FDA under the Federal Food, Drug, and Cosmetic Act, or FDC Act,and it’s implementing regulations. Our Lambda product candidate is additionally subject to regulation as a biologic under the Public Health Service Act. TheFDA subjects drugs and biologics to extensive pre and post market regulation. Failure to comply with the FDC Act and other federal and state statutes andregulations may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending NDAs, BLAs, withdrawal ofapprovals, clinical holds, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civilpenalties or criminal penalties.FDA approval is required before any new biologic, drug or dosage form, including a new use of a previously approved drug, can be marketed in the UnitedStates. The process required by the FDA before a new drug may be marketed in the United States is long, expensive, and inherently uncertain. Drugdevelopment in the United States typically involves completion of preclinical laboratory and animal tests, submission to the FDA of an Investigational NewDrug application, or IND, which must become effective before clinical testing may commence, approval by an independent institutional review board, orIRB, at each clinical site before each trial may be initiated, performance of adequate and well controlled clinical trials to establish the safety and effectivenessof the drug for each indication for which FDA approval is sought, submission to the FDA of an NDA or BLA, satisfactory completion of an FDA inspection ofthe manufacturing facility or facilities at which the product is produced, and FDA review and approval of the NDA or BLA. Developing the data to satisfyFDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity, andnovelty of the product, disease or indication.Preclinical tests include laboratory evaluation of the product’s chemistry, formulation, and toxicity, as well as animal studies to characterize and assess thepotential safety and efficacy of the product. The conduct of the preclinical tests must comply with federal regulations and requirements, including goodlaboratory practice, or GLP, regulations. These preclinical results are submitted to the FDA as part of an IND along with other information, includinginformation about the product’s chemistry, manufacturing and controls, and a proposed clinical trial protocol. Long term preclinical studies includingreproductive toxicity and carcinogenicity may be initiated or continue after the IND is submitted.37 An IND must become effective before United States clinical trials may begin. A 30-day waiting period after the submission of each IND is required prior to thecommencement of clinical testing in humans. If the FDA has neither commented on nor questioned the IND within this 30-day period, the IND automaticallybecomes effective and the clinical trial proposed in the IND may begin. If the FDA does raise any concerns or questions and places the clinical trial on aclinical hold, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, a submission of an IND maynot result in FDA authorization to commence a clinical trial. A separate submission to an existing IND must also be made for each successive clinical trialconducted during product development.Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of a qualified investigator. Clinical trialsmust be conducted: (i) in compliance with federal regulations, including good clinical practice, or GCP, requirements for conducting, monitoring, recordingand reporting the results of clinical trials, in order to ensure that the data and results are scientifically credible and accurate and that the trial subjects areadequately informed of the potential risks of participating in clinical trials; and (ii) with protocols that detail, among other things, the objectives of the trial,the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequentprotocol amendments must be submitted to the FDA as part of the IND.The FDA may order the temporary, or permanent, discontinuation of a clinical trial at any time, or impose other sanctions, if it believes that the clinical trialeither is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients. The study protocol andinformed consent information for patients in clinical trials must also be submitted to and approved by an IRB at each study site before the study commencesat that site and the IRB must monitor the clinical trial until it is completed. An IRB may also require the clinical trial at that site to be halted, eithertemporarily or permanently, for failure to comply with the IRB’s requirements or if the drug candidate has been associated with unexpected serious harm topatients, or the IRB may impose other conditions. The study sponsor or the FDA may also suspend or discontinue a clinical trial at any time on variousgrounds, including a determination that the subjects are being exposed to an unacceptable health risk.Clinical trials to support an NDA or BLA for marketing approval are typically conducted in three sequential phases, although there is leeway to overlap orcombine these phases. •Phase 1. The drug candidate is initially introduced into healthy human subjects or patients with the target disease or condition, and is testedto assess safety, dosage tolerance, pharmacokinetics and pharmacological activity, and, when possible, to ascertain evidence of efficacy. Thedrug candidate may also be tested in patients with severe or life-threatening diseases to gain an early indication of its effectiveness. •Phase 2. The trials are conducted using a limited patient population for the purposes of preliminarily determining the effectiveness of thedrug in that particular indication, ascertaining dosage tolerance, discerning the optimal dosage, and identifying possible adverse effects andsafety risks. •Phase 3. If a compound demonstrates evidence of efficacy and has an acceptable safety profile in the Phase 2 clinical trials, then Phase 3clinical trials are undertaken to obtain additional information from an expanded and diverse patient population, at multiple, geographicallydispersed clinical trial sites, in randomized controlled studies often with a double-blind design to maximize the reproducibility of the studyresults. Typically, a minimum of two positive Phase 3 clinical trials are submitted to support the product’s marketing application. ThesePhase 3 clinical trials are intended to provide sufficient data demonstrating evidence of the efficacy and safety of the drug such that the FDAcan evaluate the overall benefit-risk of the drug and provide adequate information for the labeling and package insert for the drug. Trialsconducted outside of the United States under similar, GCP-compliant conditions in accordance with local applicable laws may also beacceptable to FDA in support of product approval.Sponsors of clinical trials for investigational drugs must publicly disclose certain clinical trial information, including detailed trial design. Theserequirements are subject to specific timelines and apply to most Phase 3 clinical trials of FDA-regulated products.38 In some cases, FDA may condition approval of an NDA or BLA for a product candidate on the sponsor’s agreement to conduct additional clinical trials afterapproval. In other cases, a sponsor may voluntarily conduct additional clinical trials post approval to gain more information about the drug. Such postapproval trials are typically referred to as Phase 4 clinical trials.Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur.Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safetymonitoring board or committee. This group provides authorization for whether or not a trial may move forward at designated check points based on access tocertain data from the study. Phase 1, Phase 2, Phase 3 and Phase 4 clinical trials may not be completed successfully within any specified period, or at all.Concurrent with clinical trials, companies usually finalize a process for manufacturing the drug in commercial quantities in accordance with current goodmanufacturing practice, or cGMP, requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidateand, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drug product. Additionally,appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergounacceptable deterioration over its shelf life.After completion of the required clinical testing, an NDA or BLA is prepared and submitted to the FDA requesting approval to market the drug or biologic forone or more specified indications. FDA review and approval of the NDA or BLA is required before marketing of the product may begin in the United States.The NDA or BLA must include the results of all preclinical, clinical, and other testing, including negative or ambiguous results as well as positive findings,together with other detailed information including compilation of data relating to the product’s pharmacology, chemistry, manufacture, and controls. Theapplication must also contain extensive manufacturing information. The FDA reviews an NDA or BLA to determine, among other things, whether a product issafe and effective for its intended use. The cost of preparing and submitting an NDA or BLA is substantial. Under federal law, the submission of most NDAsand BLAs is subject to both a substantial application user fee and annual product and establishment user fees. These fees are typically increased annually.The FDA has 60 days from its receipt of an NDA or BLA to determine whether the application will be accepted for filing based on the agency’s thresholddetermination that the application is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept anapplication for filing. In this event, the application must be resubmitted with the additional information. Once the submission is accepted for filing, the FDAbegins an in-depth review.Under the Prescription Drug User Fee Act, or PDUFA, guidelines that are currently in effect, the FDA has agreed to certain performance goals in the review ofapplications. Standard applications are generally reviewed within ten months of filing, or twelve months from submission. Although FDA often meets its userfee performance goals, the FDA can extend these timelines if necessary, and FDA review may not occur on a timely basis. The FDA usually refers applicationsfor novel drugs, or drugs that present difficult questions of safety or efficacy, to an advisory committee—a panel of independent experts, typically includingclinicians and other scientific experts—for review, evaluation, and a recommendation as to whether the application should be approved and under whatconditions. The FDA is not bound by the recommendation of the advisory committee, but it generally follows its recommendations. Before approving anNDA or BLA, the FDA will typically inspect one, or more, clinical sites to assure compliance with GCP. Additionally, the FDA will inspect the facility or thefacilities at which the product is manufactured. The FDA will not approve an application unless it verifies that compliance with cGMP requirements issatisfactory and that the manufacturing processes and facilities are adequate to assure consistent production of the product within required specifications. TheFDA will not approve a product unless the application contains data showing substantial evidence that it is safe and effective in the indication studied.After the FDA evaluates the application and conducts its inspections, it issues either an approval letter or a complete response letter. A complete responseletter generally outlines the deficiencies contained in the submission and may require substantial additional testing or information in order for the FDA toreconsider the application, including potentially significant, expensive and time-consuming requirements related to clinical trials, nonclinical studies ormanufacturing. Even if such data are submitted, the FDA may ultimately decide that the NDA or BLA does not39 satisfy the criteria for approval. Data from clinical trials are not always conclusive, and the FDA may interpret data differently than we do. If and when thosedeficiencies have been addressed to the FDA’s satisfaction in a resubmission of the application, the FDA will typically issue an approval letter. The FDA hascommitted to reviewing such resubmissions in two or six months depending on the type of additional information requested. FDA approval is neverguaranteed. The FDA may refuse to approve an application if applicable regulatory criteria are not satisfied.An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. The approval for a drug may besignificantly more limited than requested in the application, including limitations on the specific diseases and dosages or the indications for use, whichcould restrict the commercial value of the product. The FDA may also require that certain contraindications, warnings, or precautions be included in theproduct’s package insert, or labeling.In addition, as a condition of approval, the FDA may require a risk evaluation and mitigation strategy, or REMS, to help ensure that the benefits of the drugoutweigh the potential risks. REMS can include medication guidelines, communication plans for healthcare professionals, and elements to assure safe use, orETASU. ETASU can include, but are not limited to, special training or certification for prescribing or dispensing-including dispensing only under certaincircumstances, special monitoring, and the use of patient registries. The requirement for a REMS or use of a companion diagnostic with a drug can materiallyaffect the potential market and profitability of the drug. Moreover, product approval may require, as a condition of approval, substantial post-approvaltesting and surveillance to monitor the drug’s safety or efficacy. The FDA may also condition approval on, among other things, changes to proposed labelingor development of adequate controls and specifications.Once granted, product approvals may be withdrawn if compliance with regulatory standards are not maintained or problems are identified following initialmarketing. In addition, after approval, some types of changes to the approved product, such as adding new indications, manufacturing changes, andadditional labeling claims, are subject to further testing requirements and FDA review and approval. There also are continuing, annual user fee requirementsfor any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applicationswith clinical data.Orphan DrugsUnder the Orphan Drug Act, the FDA may grant an orphan drug designation to products intended to treat a rare disease or condition—generally one thataffects fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting the NDA or BLA. After the FDAgrants orphan drug designation, the FDA publicly discloses the drug’s identity and its intended orphan use. Orphan drug designation does not convey anyadvantage in, or shorten the duration of, the regulatory review and approval process. The first active moiety to be approved to treat a disease with FDA’sorphan drug designation is entitled to a seven-year period of marketing exclusivity in the United States for that product, for that indication. During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug for the same orphan indication, regardless of patent status,except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity or if the FDA finds that the holder of theorphan exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease orcondition for which the drug was designated. Orphan drug exclusivity does not prevent the FDA from approving a different chemical/biological entity for thesame disease or condition. An orphan drug designation also does not preclude the same drug from being developed for a different disease or condition.Among the other benefits of orphan drug designation are tax credits for certain research expenses and a waiver of the application user fee.Advertising and PromotionDrugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing post-approval regulatory requirements. For instance,the FDA closely regulates the post-approval marketing, labeling, advertising and promotion of drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the Internet. Failureto comply with these requirements can result in adverse publicity as well as significant penalties, including the issuance of warning letters directing acompany to correct any deviations from the FDA’s standards. The FDA may also impose a requirement that future advertising and promotional materials bepre-cleared by the FDA, and the company may face federal and/or state civil and criminal investigations and prosecutions.40 Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved labeling. Changes to some of the conditionsestablished in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDAapproval of a new application or supplement before the change can be implemented. A supplement for a new indication typically requires clinical datasimilar to that in the original application, and the FDA uses the same procedures and actions in reviewing supplements as it does in reviewing NDAs or BLAs.Obtaining new indication is an important part of managing the life cycle of the drug.Adverse Event Reporting and cGMP ComplianceRecordkeeping, adverse event reporting and the submission of periodic reports are required following the FDA’s approval of an NDA or BLA. The FDA alsomay require post-marketing testing or Phase 4 clinical trials, REMS, or surveillance to monitor the effects of an approved drug. In addition, the FDA mayplace conditions on an approval that could restrict the distribution or use of the product. Furthermore, manufacture, packaging, labeling, storage anddistribution procedures must continue to conform to cGMPs after approval. Manufacturers and certain of their subcontractors are required to register theirestablishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies to assesscompliance with ongoing regulatory requirements, including cGMPs. Changes to the manufacturing process are strictly regulated and often require prior FDAapproval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP requirements and imposereporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly,manufacturers must continue to expend time, money, and effort in the areas of production and quality control to maintain compliance with cGMPs. Failure tocomply with the statutory and regulatory requirements can subject a manufacturer to possible legal or regulatory action, such as warning letters, suspensionof manufacturing, seizure of product, injunctive action or possible civil penalties. We cannot be certain that we or our present or future third-partymanufacturers or suppliers will be able to comply with the cGMP regulations and other ongoing FDA regulatory requirements. If we or our present or futurethird-party manufacturers or suppliers are not able to comply with these requirements, the FDA may halt our clinical trials, require us to recall a drug fromdistribution or withdraw approval of the NDA for that drug. Regulatory authorities may also withdraw product approvals, request product recalls, or imposemarketing restrictions through labeling changes or product removals upon discovery of previously unknown problems with a product, including adverseevents of unanticipated severity or frequency, or with manufacturing processes.Other Healthcare Laws and Compliance RequirementsIn the United States, our activities are potentially subject to regulation by federal, state, and local authorities in addition to the FDA. These other agenciesinclude, without limitation, the Centers for Medicare and Medicaid Services, other divisions of the U.S. Department of Health and Human Services, the U.S.Department of Justice and individual U.S. Attorney offices within the Department of Justice, as well as state and local governments. Such agencies enforce avariety of laws, including without limitation, anti-kickback and false claims laws, data privacy and security laws, and physician payment transparency laws.The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving any remuneration(including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, to induce or in return for purchasing, leasing, ordering or arranging for orrecommending the purchase, lease or order of any good, facility, item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federalhealthcare programs. The term “remuneration” has been broadly interpreted to include anything of value. The Anti-Kickback Statute has been interpreted toapply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers and formulary managers on the other. Although thereare a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors aredrawn narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be subjectto scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception orregulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated ona case-by-case basis based on a cumulative review of all of its facts and circumstances. Several courts have interpreted the statute’s intent requirement tomean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the Anti-KickbackStatute has been violated.41 The federal civil False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false orfraudulent claim for payment to or approval by the federal government or knowingly making, using or causing to be made or used a false record or statementmaterial to a false or fraudulent claim to the federal government. A claim includes “any request or demand” for money or property presented to the U.S.government. Several pharmaceutical and other healthcare companies have been prosecuted under these laws for, among other things, allegedly providing freeproduct to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causingfalse claims to be submitted because of the companies’ marketing of products for unapproved, and thus non-reimbursable, uses. In addition, the civilmonetary penalties statute imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presenteda claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created new federal criminal statutes that prohibit knowingly andwillfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors and knowingly andwillfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with thedelivery of or payment for healthcare benefits, items or services.Also, many states have similar fraud and abuse statutes or regulations that may be broader in scope and may apply regardless of payor, in addition to itemsand services reimbursed under Medicaid and other state programs.We may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, asamended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementing regulations, includingthe final Omnibus Rule published on January 25, 2013, imposes specified requirements relating to the privacy, security and transmission of individuallyidentifiable health information. Among other things, HITECH makes HIPAA’s security standards directly applicable to business associates, defined as serviceproviders of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf ofa covered entity. HITECH also created four new tiers of civil monetary penalties and gave state attorneys general new authority to file civil actions fordamages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. Inaddition, many state laws govern the privacy and security of health information in certain circumstances, many of which differ from HIPAA and each other insignificant ways and may not have the same effect, thus complicating compliance efforts.In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians and other healthcare providers. ThePhysician Payments Sunshine Act imposes, among other things, annual reporting requirements for covered manufacturers for certain payments and “transfersof value” provided to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate familymembers. Failure to submit timely, accurately and completely the required information for all payments, transfers of value and ownership or investmentinterests may result in civil monetary penalties of up to an aggregate of $0.2 million per year and up to an aggregate of $1.0 million per year for “knowingfailures.” Covered manufacturers must submit reports by the 90th day of each calendar year. In addition, certain states require implementation of commercialcompliance programs and compliance with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidancepromulgated by the federal government, impose restrictions on marketing practices, and/or tracking and reporting of gifts, compensation and otherremuneration or items of value provided to physicians and other healthcare professionals and entities.If our operations are found to be in violation of any of the health regulatory laws described above or any other laws that apply to it, we may be subject topenalties, including potentially significant criminal, civil and/or administrative penalties, damages, fines, disgorgement, exclusion from participation ingovernment healthcare programs, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, and the curtailmentor restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.42 International RegulationIn addition to regulations in the United States, a variety of foreign regulations govern clinical trials, commercial sales, and distribution of drugs. Whether ornot we obtain FDA approval for a drug, we or our collaborators must obtain approval of the drug by the comparable regulatory authorities of foreign countriesbefore commencing clinical trials or marketing of the drug in those countries. The approval process varies from country to country and the time to approvemay be longer or shorter than that required for FDA approval. Further, to the extent that any of our products are sold in a foreign country, we may be subjectto additional foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraudand abuse laws and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.Pharmaceutical Coverage, Pricing and ReimbursementIn the United States and other countries, patients who are prescribed treatments for their conditions and providers performing the prescribed servicesgenerally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products unless coverage isprovided and reimbursement is adequate to cover a significant portion of the cost of our products. Sales of any products for which we receive regulatoryapproval for commercial sale will therefore depend in part on the availability of reimbursement from third-party payors, including government healthadministrative authorities, managed care providers, private health insurers, and other organizations.The process for determining whether a third-party payor will provide coverage for a drug product typically is separate from the process for setting the price ofa drug product or for establishing the reimbursement rate that the payor will pay for the drug product once coverage is approved. Third-party payors maylimit coverage to specific drug products on an approved list, also known as a formulary, which might not include all of the FDA-approved drugs for aparticular indication. A decision by a third-party payor not to cover our product candidates could reduce physician utilization of our products once approvedand have a material adverse effect on our sales, results of operations and financial condition. Moreover, a third-party payor’s decision to provide coverage fora drug product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable usto maintain price levels sufficient to realize an appropriate return on our investment in product development. Additionally, coverage and reimbursement fordrug products can differ significantly from payor to payor. One third-party payor’s decision to cover a particular medical product or service does not ensurethat other payors will also provide coverage for the medical product or service, or will provide coverage at an adequate reimbursement rate. As a result, thecoverage determination process will require us to provide scientific and clinical support for the use of our products to each payor separately and will be atime-consuming process.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of drugs have been a focus in this effort.Third-party payors are increasingly challenging the prices charged for medical products and services, examining the medical necessity and reviewing thecost-effectiveness of drug products and medical services, in addition to questioning safety and efficacy. If these third-party payors do not consider ourproducts to be cost-effective compared to other available therapies, they may not cover our products after FDA approval or, if they do, the level of paymentmay not be sufficient to allow us to sell our products at a profit.In addition, the U.S. government, state legislatures and foreign governments have continued implementing cost-containment programs, including pricecontrols, restrictions on coverage and reimbursement and requirements for substitution of generic products. By way of example, in the United States, theAffordable Care Act, or ACA, contains provisions that may reduce the profitability of drug products. In January 2017, Congress voted to adopt a budgetresolution for fiscal year 2017, or the Budget Resolution, that authorizes the implementation of legislation that would repeal portions of the ACA. Further, onJanuary 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer,grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals,healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. Congress also could consider subsequent legislation to replaceelements of the ACA that are repealed. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of whichcould limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for ourproducts once approved or additional pricing pressures.43 Research and Development ExpensesOur research and development expenses were $33.0 million, $8.1 million and $0.6 million for the years ended December 31, 2016, 2015 and 2014,respectively.EmployeesAs of December 31, 2016, we had a total of 20 full-time employees in the United States, thirteen of whom were primarily engaged in research anddevelopment activities and seven of whom were engaged in general management and administration. Eight of our employees have either an M.D. or a Ph.D.None of our employees are represented by a labor union or subject to a collective bargaining agreement. We have never experienced any work stoppage andconsider our relations with our employees to be good.Corporate InformationWe were originally incorporated in California in December 2000 as Celladon Corporation. In April 2012, we reincorporated in Delaware and had our initialpublic offering in February of 2014. On March 22, 2016, Private Eiger completed its merger with Celladon in accordance with the terms of the MergerAgreement. Pursuant to the Merger Agreement, Merger Sub merged with and into Private Eiger, with Private Eiger becoming a wholly-owned subsidiary ofCelladon and the surviving corporation of the Merger. Immediately following the Merger, Celladon changed its name to “Eiger BioPharmaceuticals, Inc.” Inconnection with the Merger, our common stock began trading on The NASDAQ Global Market with the ticker symbol “EIGR” on March 23, 2016. Ourprincipal executive offices are located at 350 Cambridge Avenue, Suite 350, Palo Alto, California 94306, and our telephone number is 650-272-6138. Ourcorporate website address is www.eigerbio.com. The contents of our website are not incorporated into this Annual Report on Form 10-K and our reference tothe URL for our website is intended to be an inactive textual reference only.This Annual Report on Form 10-K contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarksand trade names referred to in this Annual Report on Form 10-K, including logos, artwork and other visual displays, may appear without the ® or TMsymbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rightsof the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply arelationship with, or endorsement or sponsorship of us by, any other company.We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth company untilthe earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering in February 2014, (b) in whichwe have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of ourcommon stock that is held by non-affiliates exceeded $700.0 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0billion in non-convertible debt during the prior three-year period. We refer to the Jumpstart Our Business Startups Act of 2012 in this Annual Report on Form10-K as the “JOBS Act,” and references to “emerging growth company” have the meaning associated with it in the JOBS Act. 44 Item 1A. Risk FactorsYou should carefully consider the following risk factors, as well as the other information in this report, and in our other public filings. The occurrence ofany of the following risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differmaterially from those contained in forward-looking statements we have made in this report and those we may make from time to time. You should considerall of the risk factors described when evaluating our business.Risks Related to our Financial Condition, Integration and Capital RequirementsWe have incurred losses since our inception, have a limited operating history on which to assess our business, and anticipate that we will continue to incursignificant losses for the foreseeable future.We are a clinical development-stage biopharmaceutical company with a limited operating history. We have incurred net losses in each year since ourinception. For the years ended December 31, 2016, 2015 and 2014, we reported a net loss of $47.1 million, $13.3 million and $1.5 million, respectively. Asof December 31, 2016, we had an accumulated deficit of approximately $76.4 million. Our prior losses, combined with expected future losses, have had andmay continue to have an adverse effect on our stockholders’ equity and working capital.We believe that the currently available resources will be sufficient to fund our operations for at least the next 12 months following the issuance date of theseconsolidated financial statements. We will continue to require substantial additional capital to continue our clinical development and potentialcommercialization activities. Accordingly, we will need to raise substantial additional capital to continue to fund our operations. The amount and timing ofour future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. Failure to raise capital as andwhen needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to develop our product candidates.We have devoted substantially all of our financial resources to identify, acquire, and develop our product candidates, including conducting clinical studiesand providing general and administrative support for our operations. To date, we have financed our operations primarily through the sale of equity securities.The amount of our future net losses will depend, in part, on the rate of our future expenditures and our ability to obtain funding through equity or debtfinancings, strategic collaborations, or grants. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degreeof risk. We expect losses to increase as we advance five Phase 2 clinical development programs for potentially four indications. While we have not yetcommenced pivotal clinical studies for any product candidate and it may be several years, if ever, before we complete pivotal clinical studies and have aproduct candidate approved for commercialization, we expect to invest significant funds into these clinical candidates to determine the potential to advancethese compounds to regulatory approval.If we obtain regulatory approval to market a product candidate, our future revenue will depend upon the size of any markets in which our product candidatesmay receive approval, and our ability to achieve sufficient market acceptance, pricing, reimbursement from third-party payors, and adequate market share forour product candidates in those markets. Even if we obtain adequate market share for our product candidates, because the potential markets in which ourproduct candidates may ultimately receive regulatory approval could be very small, we may never become profitable despite obtaining such market share andacceptance of our products.We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future and our expenses will increase substantially ifand as we: •continue the clinical development of our product candidates; •in-license or acquire additional product candidates; •undertake the manufacturing or have manufactured our product candidates; •advance our programs into larger, more expensive clinical studies; •initiate additional nonclinical, clinical, or other studies for our product candidates;45 •identify, educate and develop potential commercial opportunities, such as hepatitis D virus biology for our LNF product candidate; •seek regulatory and marketing approvals and reimbursement for our product candidates; •establish a sales, marketing, and distribution infrastructure to commercialize any products for which we may obtain marketing approval andmarket ourselves; •seek to identify, assess, acquire, and/or develop other product candidates; •make milestone, royalty or other payments under third-party license agreements; •seek to maintain, protect, and expand our intellectual property portfolio; •seek to attract and retain skilled personnel; •create additional infrastructure to support our operations as a public company and our product development and planned futurecommercialization efforts; and •experience any delays or encounter issues with the development and potential for regulatory approval of our clinical candidates such assafety issues, clinical trial accrual delays, longer follow-up for planned studies, additional major studies, or supportive studies necessary tosupport marketing approval.Further, the net losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results ofoperations may not be a representative indication of our future performance.We have never generated any revenue from product sales and may never be profitable.We have no products approved for commercialization and have never generated any revenue. Our ability to generate revenue and achieve profitabilitydepends on our ability, alone or with strategic collaboration partners, to successfully complete the development of, and obtain the regulatory and marketingapprovals necessary to commercialize, one or more of our product candidates. We do not anticipate generating revenue from product sales for the foreseeablefuture. Our ability to generate future revenue from product sales depends heavily on our success in many areas, including but not limited to: •completing research and development of our product candidates; •obtaining regulatory and marketing approvals for our product candidates; •manufacturing product candidates and establishing and maintaining supply and manufacturing relationships with third parties that meetregulatory requirements and our supply needs in sufficient quantities to meet market demand for our product candidates, if approved; •marketing, launching and commercializing product candidates for which we obtain regulatory and marketing approval, either directly orwith a collaborator or distributor; •gaining market acceptance of our product candidates as treatment options; •addressing any competing products; •protecting and enforcing our intellectual property rights, including patents, trade secrets, and know-how; •negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter; •obtaining reimbursement or pricing for our product candidates that supports profitability; and •attracting, hiring, and retaining qualified personnel.46 Even if one or more of the product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated withcommercializing any approved product candidate. Our current pipeline of product candidates has been in-licensed from third parties and we will have todevelop or acquire manufacturing capabilities in order to continue development and potential commercialization of our product candidates. Additionally, ifwe are not able to generate revenue from the sale of any approved products, we may never become profitable.Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights.To the extent that we raise additional capital through the sale of equity, debt or other securities convertible into equity, your ownership interest will bediluted, and the terms of these new securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debtfinancing, if available at all, would likely involve agreements that include covenants limiting or restricting our ability to take specific actions, such asincurring additional debt, making capital expenditures, making additional product acquisitions, or declaring dividends.If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rightsto our product candidates or future revenue streams or grant licenses on terms that are not favorable to us. We cannot assure you that we will we will be ableto obtain additional funding if and when necessary to fund our entire portfolio of product candidates to meet our projected plans. If we are unable to obtainfunding on a timely basis, we may be required to delay or discontinue one or more of our development programs or the commercialization of any productcandidates or be unable to expand our operations or otherwise capitalize on potential business opportunities, which could materially affect our business,financial condition, and results of operations.In March 2016 we completed the Merger with Celladon and the failure to successfully integrate could adversely affect our future results.Our success will depend, in significant part, on our ability to integrate successfully and to manage successfully the challenges presented by the integrationprocess in the Merger with Celladon that was completed in March 2016. Potential difficulties that may be encountered in the integration process include thefollowing: •using our cash and assets efficiently to develop our business; •appropriately managing our liabilities; •potential unknown or currently unquantifiable liabilities associated with the Merger and our operations; •difficulties in operating with a new management team as a public company; and •performance shortfalls as a result of the diversion of the management’s attention caused by integrating the Company’s operation as a publiccompany following the Merger.Covenants in our loan and security agreement restrict our business and operations in many ways and if we do not effectively manage our covenants, ourfinancial conditions and results of operations could be adversely affected. In addition, we may not meet the milestones required to access the final loanavailable under the agreement and may also not provide sufficient cash to meet the repayment obligations of our debt incurred under the loan and securityagreement.Our loan and security agreement with Oxford Finance LLC provides for up to $25.0 million in term loans due on July 1, 2021, of which $15.0 million in termloans has been borrowed to date. All of our current and future assets, except for intellectual property, are secured for our borrowings under the loan andsecurity agreement. The loan and security agreement requires that we comply with certain covenants applicable to us, including among other things,covenants restricting dispositions, changes in business, management, ownership or business locations, mergers or acquisitions, indebtedness, encumbrances,distributions, investments, transactions with affiliates and subordinated debt, any of which could restrict our business and operations, particularly our abilityto respond to changes in our business or to take specified actions to take advantage of certain business opportunities that may be presented to us.47 Our failure to comply with any of the covenants could result in a default under the loan and security agreement, which could permit the lenders to declare allor part of any outstanding borrowings to be immediately due and payable, or to refuse to permit additional borrowings under the loan and security agreement.If we are unable to repay those amounts, the lenders under the loan and security agreement could proceed against the collateral granted to them to secure thatdebt, which would seriously harm our business. In addition, should we be unable to comply with these covenants or if we default on any portion of ouroutstanding borrowings, the lenders can also impose a 5.0% penalty and restrict access to additional borrowings under the loan and security agreement.Moreover, our ability to access the final $10.0 million under the loan and security agreement is subject to our ability to achieve certain clinical developmentmilestones, which we may not be able to meet and which and could adversely affect our liquidity. In addition, although we expect to borrow additional fundsunder the loan and security agreement, before we do so, we must first satisfy ourselves that we will have access to future alternate sources of capital, includingcash flow from our own operations, equity capital markets or debt capital markets in order to repay any principal borrowed, which we may be unable to do, inwhich case, our liquidity and ability to fund our operations may be substantially impaired.Risks Related to the Development of our Product CandidatesWe are heavily dependent on the success of our product candidates, which are in the early stages of clinical development. Certain of our productcandidates have produced results in academic settings to date or for other indications than those that we contemplate and we cannot give any assurancethat we will generate data for any of our product candidates sufficient to receive regulatory approval in our planned indications, which will be requiredbefore they can be commercialized.To date, we have invested substantially all of our efforts and financial resources to identify, acquire, and develop our portfolio of product candidates. Ourfuture success is dependent on our ability to successfully further develop, obtain regulatory approval for, and commercialize one or more of these productcandidates. We currently generate no revenue from sales of any drugs, and we may never be able to develop or commercialize a product candidate.We currently have five Phase 2 development programs focused on four separate indications. One of our product candidates, exendin 9-39, has only generateddata in an academic setting and we may not be able to replicate or develop additional data to satisfy regulatory requirements for approval. For ubenimex, datato date has been developed for use in indications other than those that we have rights to or in which we plan to develop the product candidate. Similarly,some of our lonafarnib results to date rely on laboratory-developed assays that have not been validated or accepted by the FDA to assess the potentialefficacy of the product. While we are undertaking confirmation with an European Medical Agency approved assay, there can be no assurance that the data wehave seen to date may be replicated in such validated assay. In addition, we would need to verify that any of our clinical trials and results were undertakenand conducted in accordance with good clinical practices in connection with submission of such data and information to regulatory authorities forconsideration in the conduct of additional studies or regulatory approval. There can be no assurance that the data that we develop for our product candidatesin our planned indications will be sufficient to obtain regulatory approval.In addition, none of our product candidates have advanced into a pivotal study for our proposed indications and it may be years before such study is initiatedand completed, if at all. We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA orcomparable foreign regulatory authorities, and we may never receive such regulatory approval for any of our product candidates. We cannot be certain thatany of our product candidates will be successful in clinical studies or receive regulatory approval. Further, our product candidates may not receive regulatoryapproval even if they are successful in clinical studies. If we do not receive regulatory approvals for our product candidates, we may not be able to continueour operations.Our business strategy is based upon obtaining orphan drug designation for our product candidates, which is an uncertain process. The regulatoryapproval processes of the FDA and comparable foreign authorities are lengthy, time consuming, and inherently unpredictable. If we are unable to obtainorphan drug designation or regulatory approval for our product candidates, our business will be substantially harmed.Our approach to identifying and developing product candidates depends, in large part, on our ability to obtain orphan drug designation from regulatoryauthorities in major markets. Without the potential protection of this48 regulatory exclusivity upon approval, many of our product candidates would otherwise not justify investment as they are not protected by patents or they areotherwise marketed or generic products. While we assess the potential for obtaining orphan drug designation at the time that we contemplate the acquisitionof product candidates and we intend to timely file for such designation, there can be no assurance that we will obtain orphan drug designation or be able tosuccessfully meet the regulatory requirements to maintain that designation with the planned clinical trials for our product candidates. Failure to obtainorphan drug designation would make our product candidates significantly less competitive and potentially not viable investments for further development.The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable, typically takes many years following thecommencement of clinical studies, and depends upon numerous factors. In addition, approval policies, regulations, or the type and amount of clinical datanecessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, which may causedelays in the approval or the decision not to approve an application. We have not obtained regulatory approval for any product candidate, and it is possiblethat none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.Applications for our product candidates could fail to receive regulatory approval for many reasons, including but not limited to the following: •the FDA or comparable foreign regulatory authorities may disagree with the design, size or implementation of our clinical studies; •the population studied in the clinical program may not be sufficiently broad or representative to assure safety in the full population for whichwe seek approval; •the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from our development efforts; •the data collected from clinical studies of our product candidates may not be sufficient or complete or meet the regulatory requirements tosupport the submission of a new drug application, or NDA, or other submission or to obtain regulatory approval in the United States orforeign jurisdictions. For example, the LOWR HDV – 1 and LOWR HDV – 2 study is not yet complete and we have identified and continueto assess certain good clinical practice violations at one site that may impact certain data and information that we plan to submit to the FDA; •the FDA or comparable foreign regulatory authorities may find failures in our manufacturing processes, validation procedures andspecifications, or facilities of our third-party manufacturers with which we contract for clinical and commercial supplies that may delay orlimit our ability to obtain regulatory approval for our product candidates; and •the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner renderingour NDA or other submission insufficient for approval.The lengthy and uncertain regulatory approval process, as well as the unpredictability of the results of clinical studies, may result in our failing to obtainregulatory approval to market any of our product candidates or to be significantly delayed from our expectations for potential approval, which wouldsignificantly harm our business, results of operations, and prospects. In addition, although we have obtained orphan drug designation for two of our productcandidates in our planned indications to date, there can be no assurance that the FDA will grant our similar status for our other proposed developmentindications or other product candidates in the future.Drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies may not be predictive of future studyresults.Clinical testing is expensive and generally takes many years to complete, and the outcome is inherently uncertain. Failure can occur at any time during theclinical study process. The results of preclinical studies and early clinical studies of our product candidates may not be predictive of the results of larger,later-stage controlled clinical studies. Product candidates that have shown promising results in early-stage clinical studies may still suffer significant setbacksin subsequent clinical studies. Our clinical studies to date have been conducted on a small number of49 patients in limited numbers of clinical sites and in academic settings or for other indications. We will have to conduct larger, well-controlled studies in ourproposed indications to verify the results obtained to date and to support any regulatory submissions for further clinical development. A number ofcompanies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical studies due to lack of efficacy or adverse safety profilesdespite promising results in earlier, smaller clinical studies. Moreover, clinical data are often susceptible to varying interpretations and analyses. We do notknow whether any Phase 2, Phase 3, or other clinical studies we have conducted or may conduct will demonstrate consistent or adequate efficacy and safetywith respect to the proposed indication for use sufficient to obtain regulatory approval to receive regulatory approval or market our drug candidates. Forexample, the LOWR HDV – 1 and LOWR HDV – 2 study is not yet complete and we have identified and continue to assess certain good clinical practiceviolations at one site that may impact certain data and information that we plan to submit to the FDA.We may find it difficult to enroll patients in our clinical studies given the limited number of patients who have the diseases for which our productcandidates are being studied. Difficulty in enrolling patients could delay or prevent clinical studies of our product candidates.Identifying and qualifying patients to participate in clinical studies of our product candidates is essential to our success. The timing of our clinical studiesdepends in part on the rate at which we can recruit patients to participate in clinical trials of our product candidates, and we may experience delays in ourclinical studies if we encounter difficulties in enrollment.The eligibility criteria of our planned clinical studies may further limit the available eligible study participants as we expect to require that patients havespecific characteristics that we can measure or meet the criteria to assure their conditions are appropriate for inclusion in our clinical studies. We may not beable to identify, recruit, and enroll a sufficient number of patients to complete our clinical studies in a timely manner because of the perceived risks andbenefits of the product candidate under study, the availability and efficacy of competing therapies and clinical studies, and the willingness of physicians toparticipate in our planned clinical studies. If patients are unwilling to participate in our clinical studies for any reason, the timeline for conducting studiesand obtaining regulatory approval of our product candidates may be delayed.If we experience delays in the completion of, or termination of, any clinical study of our product candidates, the commercial prospects of our productcandidates could be harmed, and our ability to generate product revenue from any of these product candidates could be delayed or prevented. In addition,any delays in completing our clinical studies would likely increase our overall costs, impair product candidate development and jeopardize our ability toobtain regulatory approval relative to our current plans. Any of these occurrences may harm our business, financial condition, and prospects significantly.Clinical studies are costly, time consuming and inherently risky, and we may fail to demonstrate safety and efficacy to the satisfaction of applicableregulatory authorities.Clinical development is expensive, time consuming and involves significant risk. We cannot guarantee that any clinical studies will be conducted asplanned or completed on schedule, if at all. A failure of one or more clinical studies can occur at any stage of development. Events that may preventsuccessful or timely completion of clinical development include but are not limited to: •inability to generate satisfactory preclinical, toxicology, or other in vivo or in vitro data or diagnostics to support the initiation orcontinuation of clinical studies necessary for product approval; •delays in reaching agreement on acceptable terms with CROs and clinical study sites, the terms of which can be subject to extensivenegotiation and may vary significantly among different CROs and clinical study sites; •delays in obtaining required Institutional Review Board, or IRB, approval at each clinical study site; •failure to permit the conduct of a study by regulatory authorities, after review of an investigational new drug, or IND, or equivalent foreignapplication or amendment; •delays in recruiting qualified patients in our clinical studies;50 •failure by clinical sites or our CROs or other third parties to adhere to clinical study requirements or report complete findings such as theLOWR HDV – 1 and LOWR HDV – 2 study which is not yet complete and we have identified and continue to assess certain good clinicalpractice violations at one site that may impact certain data and information that we plan to submit to the FDA; •failure to perform the clinical studies in accordance with the FDA’s good clinical practices requirements, or applicable foreign regulatoryguidelines; •patients dropping out of our clinical studies; •occurrence of adverse events associated with our product candidates; •changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; •the cost of clinical studies of our product candidates; •negative or inconclusive results from our clinical trials which may result in our deciding, or regulators requiring us, to conduct additionalclinical studies or abandon development programs in other ongoing or planned indications for a product candidate; and •delays in reaching agreement on acceptable terms with third-party manufacturers and the time for manufacture of sufficient quantities of ourproduct candidates for use in clinical studies.Any inability to successfully complete clinical development and obtain regulatory approval could result in additional costs to us or impair our ability togenerate revenue. In addition, if we make manufacturing or formulation changes to our product candidates, such as our plan to manufacture a newsubcutaneous formulation of exendin 9-39, we may need to conduct additional studies or the results obtained from such new formulation may not beconsistent with previous results obtained. Clinical study delays could also shorten any periods during which our products have patent protection and mayallow competitors to develop and bring products to market before we do, which could impair our ability to obtain orphan drug designation exclusivity and tosuccessfully commercialize our product candidates and may harm our business and results of operations.Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit thecommercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.Undesirable side effects, including the reporting of potentially incomplete or inadequate safety data from LOWR HDV – 1 and LOWR HDV – 2, caused byour product candidates could cause us or regulatory authorities to interrupt, delay, or terminate or conduct additional or larger clinical studies or even ifapproved, result in a restrictive label or delay regulatory approval by the FDA or comparable foreign authorities.In addition, while our LNF product candidate has been studied in thousands of oncology patients and the most common non-hematologic adverse events ofany grade were gastrointestinal system disorders (nausea, anorexia, diarrhea and vomiting), weight loss, fatigue and rash, treatment discontinuation across theLNF clinical studies conducted in oncology has been in the range of approximately 19-52% and we may experience comparable or higher rates ofdiscontinuation in testing in our anti-viral, hepatitis D virus studies. There is no guarantee that additional or more severe side effects will not be identifiedthrough ongoing clinical studies by other uses of LNF for other indications or our own clinical trials. Additionally, while we have a license to anotherfarnesyltranferase inhibitor compound, tipifarnib, from Janssen Pharmaceutica, N.V., or Janssen, Janssen has granted rights to tipifarnib to Kura Oncology,Inc., or Kura, in oncology and negative results or undesirable side effects from Kura’s clinical trials for a compound with a similar mechanism of action maynegatively impact the perception of LNF for anti-viral indications. Merck may also grant rights to other anti-viral or potentially other indications to otherthird parties. Undesirable side effects and negative results for other indications may negatively impact the development and potential for approval of ourproduct candidates for our proposed indications.51 Additionally, even if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused bysuch products, potentially significant negative consequences could result, including but not limited to: •regulatory authorities may withdraw approvals of such products; •regulatory authorities may require additional warnings on the label; •we may be required to create a Risk Evaluation and Mitigation Strategy, or REMS, plan, which could include a medication guide outliningthe risks of such side effects for distribution to patients, a communication plan for healthcare providers, and/or other elements to assure safeuse; •we could be sued and held liable for harm caused to patients; and •our reputation may suffer.Any of these events could prevent us from achieving or maintaining market acceptance of a product candidate, even if approved, and could significantlyharm our business, results of operations, and prospects.Even if we obtain regulatory approval for a product candidate, we will remain subject to ongoing regulatory requirements.If our product candidates are approved, they will be subject to ongoing regulatory requirements with respect to manufacturing, labeling, packaging, storage,advertising, promotion, sampling, record-keeping, conduct of post-marketing studies, and submission of safety, efficacy and other post-approval information,including both federal and state requirements in the United States and requirements of comparable foreign regulatory authorities.Manufacturers and manufacturers’ facilities are required to continuously comply with FDA and comparable foreign regulatory authority requirements,including ensuring that quality control and manufacturing procedures conform to current Good Manufacturing Practices, or cGMP, regulations andcorresponding foreign regulatory manufacturing requirements. As such, we and our contract manufacturers will be subject to continual review andinspections to assess compliance with cGMP and adherence to commitments made in any NDA or marketing authorization application, or MAA.Any regulatory approvals that we receive for our product candidates may be subject to limitations on the approved indicated uses for which the productcandidate may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase IVclinical trials, and surveillance to monitor the safety and efficacy of the product candidate. We will be required to report certain adverse reactions andproduction problems, if any, to the FDA and comparable foreign regulatory authorities.Any new legislation addressing drug safety issues could result in delays in product development or commercialization, or increased costs to assurecompliance. If our original marketing approval for a product candidate was obtained through an accelerated approval pathway, we could be required toconduct a successful post-marketing clinical study in order to confirm the clinical benefit for our products. An unsuccessful post-marketing study or failure tocomplete such a study could result in the withdrawal of marketing approval.If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problemswith the facility where the product is manufactured, or disagrees with the promotion, marketing, or labeling of a product, the regulatory agency may imposerestrictions on that product or us, including requiring withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements,a regulatory agency or enforcement authority may, among other things: •issue warning letters; •impose civil or criminal penalties; •suspend or withdraw regulatory approval; •suspend any of our ongoing clinical studies;52 •refuse to approve pending applications or supplements to approved applications submitted by us; •impose restrictions on our operations, including closing our contract manufacturers’ facilities; or •require a product recall.Any government investigation of alleged violations of law would be expected to require us to expend significant time and resources in response and couldgenerate adverse publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to develop andcommercialize our products and the value of us and our operating results would be adversely affected.We rely on third parties to conduct our clinical studies, manufacture our product candidates and perform other services. If these third parties do notsuccessfully perform and comply with regulatory requirements, we may not be able to successfully complete clinical development, obtain regulatoryapproval or commercialize our product candidates and our business could be substantially harmed.We have relied upon and plan to continue to rely upon investigators and third-party CROs to conduct, monitor and manage our ongoing clinical programs.We rely on these parties for execution of clinical studies and manage and control only certain aspects of their activities. We remain responsible for ensuringthat each of our studies is conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards, and our reliance on the CROsdoes not relieve us of our regulatory responsibilities. We, our investigators, and our CROs and other vendors are required to comply all applicable laws,regulations and guidelines, including those required by the FDA and comparable foreign regulatory authorities for all of our product candidates in clinicaldevelopment. If we or any of our investigators, CROs or vendors fail to comply with applicable laws, regulations and guidelines, the results generated in ourclinical studies may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional studies beforeapproving our marketing applications. For example, since LOWR HDV – 1 and LOWR HDV – 2 have not yet completed, and we have identified and continueto assess certain good clinical practice violations at one site that may impact certain data and information that we plan to submit to the FDA. We cannotassure you that our CROs and other vendors will meet these requirements, or that upon inspection by any regulatory authority, such regulatory authority willdetermine that efforts, including any of our clinical studies, comply with applicable requirements. Our failure to comply with these laws, regulations andguidelines may require us to repeat clinical studies or conduct larger additional studies, which would be costly and delay the regulatory approval process.If any of our relationships with investigators or third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs in a timelymanner or do so on commercially reasonable terms. In addition, our CROs may not prioritize our clinical studies relative to those of other customers and anyturnover in personnel or delays in the allocation of CRO employees by the CRO may negatively affect our clinical studies. If investigators or CROs do notsuccessfully carry out their contractual duties or obligations or meet expected deadlines, our clinical studies may be delayed or terminated and we may not beable to meet our current plans with respect to our product candidates. CROs may also involve higher costs than anticipated, which could negatively affect ourfinancial condition and operations.In addition, we do not currently have, nor do we plan to establish the capability to manufacture product candidates for use in the conduct of our clinicalstudies, and we lack the resources and the capability to manufacture any of our product candidates on a clinical or commercial scale without the use of third-party manufacturers. We plan to rely on third-party manufacturers and their responsibilities will include purchasing from third-party suppliers the materialsnecessary to produce our product candidates for our clinical studies and regulatory approval. There are expected to be a limited number of suppliers for theactive ingredients and other materials that we expect to use to manufacture our product candidates, and we may not be able to identify alternative suppliers toprevent a possible disruption of the manufacture of our product candidates for our clinical studies, and, if approved, ultimately for commercial sale. Althoughwe generally do not expect to begin a clinical study unless we believe we have a sufficient supply of a product candidate to complete the study, anysignificant delay or discontinuity in the supply of a product candidate, or the active ingredient or other material components in the manufacture of theproduct candidate, could delay completion of our clinical studies and potential timing for regulatory approval of our product candidates, which would harmour business and results of operations.53 With respect to our LNF program, we procured an inventory of product from Merck to supply our initial clinical study needs. In 2016, we have transferred themanufacturing of drug substance and drug product to our third-party contractors. These vendors have successfully made GMP batches for our future clinicalstudies. With respect to our lambda program, as part of the license agreement, we obtained a substantial inventory of product from BMS sufficient to initiateour clinical trials. We are in the process of transferring the manufacturing technology to our third-party vendors and anticipate GMP manufacturing at thosefacilities to begin in 2017. With respect to our ubenimex program we have relied on Nippon Kayaku to provide us with product to conduct our trials andhave completed the process of transferring the manufacturing of ubenimex to our third-party vendors in the US.We rely and expect to continue to rely on third parties to manufacture our clinical product supplies, and if those third parties fail to obtain approval ofgovernment regulators, fail to provide us with sufficient quantities of drug product, or fail to do so at acceptable quality levels or prices our productcandidates could be stopped, delayed, or made less profitable.We do not currently have nor do we plan to acquire the infrastructure or capability internally to manufacture our clinical supplies for use in the conduct ofour clinical trials, and we lack the resources and the capability to manufacture any of our product candidates on a clinical or commercial scale. We currentlyrely on outside vendors to source raw materials and manufacture our clinical supplies of our product candidates and plan to continue relying on third partiesto manufacture our product candidates on a commercial scale, if approved.The facilities used by our contract manufacturers to manufacture our product candidates must be approved by the FDA pursuant to inspections that will beconducted after we submit our marketing applications to the FDA. We do not control the manufacturing process of, and are completely dependent on, ourcontract manufacturing partners for compliance with the regulatory requirements, known as cGMPs, for manufacture of our product candidates. If our contractmanufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, theywill not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of ourcontract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatoryauthority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need tofind alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our productcandidates, if approved.We do not yet have sufficient information to reliably estimate the cost of the commercial manufacturing of our product candidates, and the actual cost tomanufacture our product candidates could materially and adversely affect the commercial viability of our product candidates. As a result, we may never beable to develop a commercially viable product.In addition, our reliance on third-party manufacturers exposes us to the following additional risks: •We may be unable to identify manufacturers on acceptable terms or at all. •Our third-party manufacturers might be unable to timely formulate and manufacture our product or produce the quantity and quality requiredto meet our clinical and commercial needs, if any. •Contract manufacturers may not be able to execute our manufacturing procedures appropriately. •Our future contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time requiredto supply our clinical trials or to successfully produce, store and distribute our products. •Manufacturers are subject to ongoing periodic unannounced inspection by the FDA and corresponding state agencies to ensure strictcompliance with cGMP and other government regulations and corresponding foreign standards. We do not have control over third-partymanufacturers’ compliance with these regulations and standards. •We may not own, or may have to share, the intellectual property rights to any improvements made by our third-party manufacturers in themanufacturing process for our product candidates. •Our third-party manufacturers could breach or terminate their agreement with us.54 Each of these risks could delay our clinical trials, the approval, if any of our product candidates by the FDA or the commercialization of our productcandidates or result in higher costs or deprive us of potential product revenue. In addition, we rely on third parties to perform release testing on our productcandidates prior to delivery to patients. If these tests are not appropriately conducted and test data are not reliable, patients could be put at risk of seriousharm and could result in product liability suits.The manufacture of medical products is complex and requires significant expertise and capital investment, including the development of advancedmanufacturing techniques and process controls. Manufacturers of biologic products often encounter difficulties in production, particularly in scaling up andvalidating initial production and absence of contamination. These problems include difficulties with production costs and yields, quality control, includingstability of the product, quality assurance testing, operator error, shortages of qualified personnel, as well as compliance with strictly enforced federal, stateand foreign regulations. Furthermore, if contaminants are discovered in our supply of our product candidates or in the manufacturing facilities, suchmanufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. We cannot assure you that anystability or other issues relating to the manufacture of our product candidates will not occur in the future. Additionally, our manufacturers may experiencemanufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our manufacturers were toencounter any of these difficulties, or otherwise fail to comply with their contractual obligations, our ability to provide our product candidates to patients inclinical trials would be jeopardized. Any delay or interruption in the supply of clinical trial supplies could delay the completion of clinical trials, increase thecosts associated with maintaining clinical trial programs and, depending upon the period of delay, require us to commence new clinical trials at additionalexpense or terminate clinical trials completely.If the market opportunities for our product candidates are smaller than we believe they are, we may not meet our revenue expectations and, even assumingapproval of a product candidate, our business may suffer. Because the patient populations in the market for our product candidates may be small, we mustbe able to successfully identify patients and acquire a significant market share to achieve profitability and growth.We focus our product development principally on treatments for orphan diseases. Given the small number of patients who have the diseases that we aretargeting, our eligible patient population and pricing estimates may differ significantly from the actual market addressable by our product candidate. Ourprojections of both the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit fromtreatment with our product candidates, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including thescientific literature, patient foundations, or market research, and may prove to be incorrect. Further, new studies may change the estimated incidence orprevalence of these diseases. The number of patients may turn out to be lower than expected. For example, for LNF and lambda, HDV is associated withhepatitis B virus infection, which is a pre-requisite for the replication of HDV. Although we believe that the data are supportive of the increased severity ofhepatitis in the presence of hepatitis D and hepatitis B virus co-infection compared to hepatitis B alone, there can be no assurance that our clinical trials willsuccessfully address this condition. Likewise, the potentially addressable patient population for each of our product candidates may be limited or may not beamenable to treatment with our product candidates, and new patients may become increasingly difficult to identify or gain access to, which would adverselyaffect our results of operations and our business.We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are similar, moreadvanced, or more effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our productcandidates.The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. We are currentlyaware of various existing therapies that may compete with our product candidates. For example, we have competitors both in the United States andinternationally, including multinational pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies. Some of thepharmaceutical and biotechnology companies we expect to compete with include Gilead, Merck, Roche, Replicor, Arrowhead, Novartis, Xoma, Reata andArena as well as other smaller companies or biotechnology startups and large multinational pharmaceutical companies. Many of our competitors havesubstantially greater financial, technical, and other resources, such as larger research and development staff and experienced marketing and55 manufacturing organizations. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resourcesbeing concentrated in our competitors. As a result, these companies may obtain regulatory approval more rapidly than we are able to and may be moreeffective in selling and marketing their products as well. Smaller or early-stage companies may also prove to be significant competitors, particularly throughcollaborative arrangements with large, established companies. Competition may increase further as a result of advances in the commercial applicability oftechnologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring, or licensing on anexclusive basis, products that are more effective or less costly than any product candidate that we may develop, or achieve earlier patent protection,regulatory approval, product commercialization, and market penetration than we do. Additionally, technologies developed by our competitors may renderour potential product candidates uneconomical or obsolete, and we may not be successful in marketing our product candidates against competitors.We currently have limited marketing and sales experience. If we are unable to establish sales and marketing capabilities or enter into agreements withthird parties to market and sell our product candidates, we may be unable to generate any revenue.Although certain of our employees may have marketed, launched and sold other pharmaceutical products in the past while employed at other companies, wehave no recent experience selling and marketing our product candidates and we currently have no marketing or sales organization. To successfullycommercialize any products that may result from our development programs, we will need to invest in and develop these capabilities, either on our own orwith others, which would be expensive, difficult and time consuming. Any failure or delay in the timely development of our internal commercializationcapabilities could adversely impact the potential for success of our products.Further, given our lack of prior experience in marketing and selling biopharmaceutical products, we may rely on future collaborators to commercialize ourproducts. If collaborators do not commit sufficient resources to commercialize our future products and we are unable to develop the necessary marketing andsales capabilities on our own, we will be unable to generate sufficient product revenue to sustain or grow our business. We may be competing with companiesthat currently have extensive and well-funded marketing and sales operations, in particular in the markets our product candidates are intended to address.Without appropriate capabilities, whether directly or through third-party collaborators, we may be unable to compete successfully against these moreestablished companies.The commercial success of any of our current or future product candidate will depend upon the degree of market acceptance by physicians, patients, third-party payors, and others in the medical community.Even with the approvals from the FDA and comparable foreign regulatory authorities, the commercial success of our products will depend in part on thehealth care providers, patients, and third-party payors accepting our product candidates as medically useful, cost-effective, and safe. Any product that webring to the market may not gain market acceptance by physicians, patients, third-party payors and other health care providers. The degree of marketacceptance of any of our products will depend on a number of factors, including without limitation: •the efficacy of the product as demonstrated in clinical studies and potential advantages over competing treatments; •the prevalence and severity of the disease and any side effects; •the clinical indications for which approval is granted, including any limitations or warnings contained in a product’s approved labeling; •the convenience and ease of administration; •the cost of treatment; •the willingness of the patients and physicians to accept these therapies; •the marketing, sales and distribution support for the product;56 •the publicity concerning our products or competing products and treatments; and •the pricing and availability of third-party insurance coverage and reimbursement.Even if a product displays a favorable efficacy and safety profile upon approval, market acceptance of the product remains uncertain. Efforts to educate themedical community and third-party payors on the benefits of the products may require significant investment and resources and may never be successful. Ifour products fail to achieve an adequate level of acceptance by physicians, patients, third-party payors, and other health care providers, we will not be able togenerate sufficient revenue to become or remain profitable.Failure to obtain or maintain adequate reimbursement or insurance coverage for new or current products could limit our ability to market those productsand decrease our ability to generate revenue.The pricing, coverage and reimbursement of our products must be sufficient to support our commercial efforts and other development programs and theavailability and adequacy of coverage and reimbursement by governmental and private payors are essential for most patients to be able to afford expensivetreatments, particularly in orphan drug designated indications where the eligible patient population is small. Sales of our product candidates will dependsubstantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid for or reimbursed by health maintenance,managed care, pharmacy benefit and similar healthcare management organizations, or government authorities, private health insurers, and other third-partypayors. If coverage and reimbursement are not available, or are available only in limited amounts, we may have to subsidize or provide products for free or wemay not be able to successfully commercialize our products.In addition, there is significant uncertainty related to the insurance coverage and reimbursement for newly approved products. In the United States, theprincipal decisions about coverage and reimbursement for new drugs are typically made by the Centers for Medicare & Medicaid Services, or CMS, anagency within the U.S. Department of Health and Human Services, as CMS decides whether and to what extent a new drug will be covered and reimbursedunder Medicare. Private payors tend to follow the coverage reimbursement policies established by CMS to a substantial degree. It is difficult to predict whatCMS will decide with respect to reimbursement for products such as ours and what reimbursement codes our products may receive.Outside the United States, international operations are generally subject to extensive governmental price controls and other price-restrictive regulations, andwe believe the increasing emphasis on cost-containment initiatives in Europe, Canada, and other countries has and will continue to put pressure on thepricing and usage of products. In many countries, the prices of products are subject to varying price control mechanisms as part of national health systems.Price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our products. Accordingly, in markets outside theUnited States, the potential revenue may be insufficient to generate commercially reasonable revenue and profits.Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to limit or reduce healthcare costs may result inrestrictions on coverage and the level of reimbursement for new products and, as a result, they may not cover or provide adequate payment for our products.We expect to experience pricing pressures in connection with products due to the increasing trend toward managed healthcare, including the increasinginfluence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularlyprescription drugs has and is expected to continue to increase in the future. As a result, profitability of our products may be more difficult to achieve even ifthey receive regulatory approval.We intend to rely on a combination of exclusivity from orphan drug designation as well as patent rights for our product candidates and any future productcandidates. If we are unable to obtain or maintain exclusivity from the combination of these approaches, we may not be able to compete effectively in ourmarkets.Our business strategy is to focus on product candidates for which orphan drug designation may be obtained in the major markets of the world. In addition, werely or will rely upon a combination of patents, trade secret protection, and confidentiality agreements to protect the intellectual property related to ourtechnologies and product candidates. For example, the portfolio of patents licensed from Merck expires before the anticipated launch date of the LNF57 product candidate. Our success depends in large part on our and our licensors’ ability to obtain regulatory exclusivity and maintain patent and otherintellectual property protection in the United States and in other countries with respect to our proprietary technology and products.Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is intended to treat a rare disease or condition, defined as a patientpopulation of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonableexpectation that the cost of developing the drug will be recovered from sales in the United States. In the European Union, the EMA’s Committee for OrphanMedicinal Products, or COMP, grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention, ortreatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the European Union. Additionally,designation is granted for products intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating or serious and chroniccondition when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment indeveloping the drug or biological product or where there is no satisfactory method of diagnosis, prevention, or treatment, or, if such a method exists, themedicine must be of significant benefit to those affected by the condition.In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, taxadvantages, and user-fee waivers. In addition, if a product receives the first FDA approval for the indication for which it has orphan drug designation, theproduct is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indicationfor a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity or where themanufacturer is unable to assure sufficient product quantity. In the European Union, orphan drug designation entitles a party to financial incentives such asreduction of fees or fee waivers and ten years of market exclusivity following drug or biological product approval. This period may be reduced to six years ifthe orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance ofmarket exclusivity.Because the extent and scope of patent protection for our products may in some cases be limited, orphan drug designation is especially important for ourproducts for which orphan drug designation may be available. For eligible drugs, we plan to rely on the exclusivity period under the Orphan Drug Act tomaintain a competitive position. If we do not obtain orphan drug exclusivity for our drug products and biologic products that do not have broad patentprotection, our competitors may then sell the same drug to treat the same condition sooner than if we had obtained orphan drug exclusivity and our revenuewill be reduced.Even though we have orphan drug designation for LNF in the United States and Europe, we may not be the first to obtain marketing approval for anyparticular orphan indication due to the uncertainties associated with developing pharmaceutical products. Further, even if we obtain orphan drug exclusivityfor a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties can beapproved for the same condition. Even after an orphan drug is approved, the FDA or EMA can subsequently approve the same drug with the same activemoiety for the same condition if the FDA or EMA concludes that the later drug is safer, more effective, or makes a major contribution to patient care. Orphandrug designation neither shortens the development time or regulatory review time of a product candidate nor gives the product candidate any advantage inthe regulatory review or approval process.We have sought to protect our proprietary position by filing patent applications in the United States and abroad related to our product candidates that areimportant to our business. This process is expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable patentapplications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and developmentoutput before it is too late to obtain patent protection.The patent position of biotechnology and pharmaceutical companies generally is highly uncertain and involves complex legal and factual questions forwhich legal principles remain unsolved. The patent applications that we own or in-licenses may fail to result in issued patents with claims that cover ourproduct candidates in the United States or in other foreign countries. There is no assurance that all potentially relevant prior art relating to our patents andpatent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending58 patent application. Even if patents do successfully issue, and even if such patents cover our product candidates, third parties may challenge their validity,enforceability, or scope, which may result in such patents being narrowed, found unenforceable or invalidated. Furthermore, even if they are unchallenged,our patents and patent applications may not adequately protect our intellectual property, provide exclusivity for our product candidates, or prevent othersfrom designing around our claims. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverseimpact on our business.We, independently or together with our licensors, have filed several patent applications covering various aspects of our product candidates. We cannot offerany assurances about which, if any, patents will issue, the breadth of any such patent or whether any issued patents will be found invalid and unenforceableor will be threatened by third parties. Any successful opposition to these patents or any other patents owned by or licensed to us after patent issuance coulddeprive us of rights necessary for the successful commercialization of any product candidates that we may develop. Further, if we encounter delays inregulatory approvals, the period of time during which we could market a product candidate under patent protection could be reduced.Although we have licensed a number of patents covering methods of use and certain compositions of matter, we do not have complete patent protection forour product candidates. For example, the patent coverage for LNF expires before the anticipated launch date. Likewise, most of the patents covering productsthat we have licensed in from Stanford have limited protection outside of the United States. Therefore, a competitor could develop the same or similarproduct that may compete with our product candidate.Certain of our product licenses are limited to specified indications or therapeutic areas which may result in the same compound being developed andcommercialized by a third party whom we have no control over or rights against. This may result in safety data, pricing or off label uses from that third party’sproduct that may negatively affect the development and commercialization of our product candidates. For example, Kura has an exclusive license totipifarnib for use in cancer indications while we have a license for anti-viral indications. As a result of Kura’s right to use the same compound in a differentindication, it is possible that development and sales may impact our product development and commercialization efforts. If we cannot obtain and maintaineffective protection of exclusivity from our regulatory efforts and intellectual property rights, including patent protection, for our product candidates, we maynot be able to compete effectively and our business and results of operations would be harmed.We may not have sufficient patent term protections for our products to effectively protect our business.Patents have a limited term. In the United States, the statutory expiration of a patent is generally 20 years after it is filed. Although various extensions may beavailable, the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life hasexpired for a product, we may be open to competition from generic medications. In addition, upon issuance in the United States any patent term can beadjusted based on certain delays caused by the applicant(s) or the United States Patent and Trademark Office, or USPTO. For example, a patent term can bereduced based on certain delays caused by the patent applicant during patent prosecution.Patent term extensions under the Hatch-Waxman Act in the United States and under supplementary protection certificates in Europe may be available toextend the patent or data exclusivity terms of products. With respect to ubenimex, LNF, lambda and exendin 9-39, a substantial portion of the potentialcommercial opportunity will likely rely on patent term extensions, and we cannot provide any assurances that any such patent term extensions will beobtained and, if so, for how long. As a result, we may not be able to maintain exclusivity for our products for an extended period after regulatory approval,which would negatively impact our business and results of operations. If we do not have sufficient patent terms or regulatory exclusivity to protect ourproducts, our business and results of operations will be adversely affected.Patent laws and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement ordefense of our issued patents.Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrowthe scope of our patent protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Publications ofdiscoveries in the scientific59 literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18months after filing, or in some cases not at all. We therefore cannot be certain that it or our licensors were the first to make the invention claimed in our ownedand licensed patents or pending applications, or that we or our licensor were the first to file for patent protection of such inventions. Assuming the otherrequirements for patentability are met, in the United States prior to March 15, 2013, the first to make the claimed invention is entitled to the patent, whileoutside the United States, the first to file a patent application is entitled to the patent. After March 15, 2013, under the Leahy-Smith America Invents Act, orthe Leahy-Smith Act, enacted on September 16, 2011, the United States has moved to a first to file system. The Leahy-Smith Act also includes a number ofsignificant changes that affect the way patent applications will be prosecuted and may also affect patent litigation. The effects of these changes are currentlyunclear as the USPTO must still implement various regulations, the courts have yet to address any of these provisions and the applicability of the act and newregulations on specific patents discussed herein have not been determined and would need to be reviewed. In general, the Leahy-Smith Act and itsimplementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of ourissued patents, all of which could have a material adverse effect on our business and financial condition.If we are unable to maintain effective proprietary rights for our product candidates or any future product candidates, we may not be able to competeeffectively in our markets.In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that isnot patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our product candidate discoveryand development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can bedifficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees,consultants, scientific advisors, and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintainingphysical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals,organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our tradesecrets may otherwise become known or be independently discovered by competitors.Although we expect all of our employees and consultants to assign their inventions to us, and all of our employees, consultants, advisors, and any thirdparties who have access to our proprietary know-how, information, or technology to enter into confidentiality agreements, we cannot provide any assurancesthat all such agreements have been duly executed or that our trade secrets and other confidential proprietary information will not be disclosed or thatcompetitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position and may have a material adverse effect on ourbusiness. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties formisappropriating the trade secret.Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There have been many lawsuitsand other proceedings involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patentinfringement lawsuits, interferences, oppositions, and reexamination proceedings before the USPTO and corresponding foreign patent offices. Numerous U.S.and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing productcandidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may besubject to claims of infringement of the patent rights of third parties.Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applicationswith claims to materials, formulations, methods of manufacture, or methods for treatment related to the use or manufacture of our product candidates. We haveconducted freedom to60 operate analyses with respect to only certain of our product candidates, and therefore we do not know whether there are any third-party patents that wouldimpair our ability to commercialize these product candidates. We also cannot guarantee that any of our analyses are complete and thorough, nor can we besure that we have identified each and every patent and pending application in the United States and abroad that is relevant or necessary to thecommercialization of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applicationsthat may later result in issued patents that our product candidates may infringe.In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents wereheld by a court of competent jurisdiction to cover aspects of our formulations, the manufacturing process of any of our product candidates, methods of use,any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability tocommercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire or are finally determined to beinvalid or unenforceable. Such a license may not be available on commercially reasonable terms, or at all.Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop andcommercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense andwould be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to paysubstantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one ormore licenses from third parties, which may be impossible or require substantial time and monetary expenditure.We may not be successful in meeting our diligence obligations under our existing license agreements necessary to maintain our product candidate licensesin effect. In addition, if required in order to commercialize our product candidates, we may be unsuccessful in obtaining or maintaining necessary rights toour product candidates through acquisitions and in-licenses.We currently have rights to the intellectual property, through licenses from third parties and under patents that we do not own, to develop and commercializeour product candidates. Because our programs may require the use of proprietary rights held by third parties, the growth of our business will likely depend inpart on our ability to maintain in effect these proprietary rights. For example, we have certain specified diligence obligations under our Stanford licenseagreements for our ubenimex and LNF product candidates. We may not be able to achieve the required diligence milestones in a timely manner, which mayresult in a right of termination by Stanford, and we may be unable to successfully negotiate an extension or waiver of those termination rights. Anytermination of license agreements with third parties with respect to our product candidates would be expected to negatively impact our business prospects.We may be unable to acquire or in-license any compositions, methods of use, processes, or other third-party intellectual property rights from third parties thatwe identify as necessary for our product candidates. The licensing and acquisition of third-party intellectual property rights is a competitive area, and anumber of more established companies are also pursuing strategies to license or acquire third-party intellectual property rights that we may considerattractive. These established companies may have a competitive advantage over us due to their size, cash resources, and greater clinical development andcommercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. Even if we areable to license or acquire third-party intellectual property rights that are necessary for our product candidates, there can be no assurance that they will beavailable on favorable terms.We collaborate with U.S. and foreign academic institutions to identify product candidates, accelerate our research and conduct development. Typically, theseinstitutions have provided us with an option to negotiate an exclusive license to any of the institution’s rights in the patents or other intellectual propertyresulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or under terms that areacceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursuea program of interest to us.61 If we are unable to successfully obtain and maintain rights to required third-party intellectual property, we may have to abandon development of that productcandidate or pay additional amounts to the third party, and our business and financial condition could suffer.Our product candidates may be subject to generic competition.Under the Hatch-Waxman Act, a pharmaceutical manufacturer may file an abbreviated new drug application, or ANDA, seeking approval of a generic copy ofan approved innovator product. Under the Hatch-Waxman Act, a manufacturer may also submit an NDA under section 505(b)(2) that references the FDA’sfinding of safety and effectiveness of a previously approved drug. A 505(b)(2) NDA product may be for a new or improved version of the original innovatorproduct. Innovative small molecule drugs may be eligible for certain periods of regulatory exclusivity (e.g., five years for new chemical entities, three yearsfor changes to an approved drug requiring a new clinical study, seven years for orphan drugs), which preclude FDA approval (or in some circumstances, FDAfiling and review of) an ANDA or 505(b)(2) NDA relying on the FDA’s finding of safety and effectiveness for the innovative drug. In addition to the benefitsof regulatory exclusivity, an innovator NDA holder may have patents claiming the active ingredient, product formulation or an approved use of the drug,which would be listed with the product in the FDA publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” known as the “OrangeBook.” If there are patents listed in the Orange Book, a generic applicant that seeks to market its product before expiration of the patents must include in theANDA or 505(b)(2) what is known as a “Paragraph IV certification,” challenging the validity or enforceability of, or claiming non-infringement of, the listedpatent or patents. Notice of the certification must be given to the innovator, too, and if within 45 days of receiving notice the innovator sues to protect itspatents, approval of the ANDA is stayed for 30 months, or as lengthened or shortened by the court.If there are patents listed for our product candidates in the Orange Book, ANDAs and 505(b)(2) NDAs with respect to those product candidates would berequired to include a certification as to each listed patent indicating whether the ANDA applicant does or does not intend to challenge the patent. We cannotpredict whether any patents issuing from our pending patent applications will be eligible for listing in the Orange Book, how any generic competitor wouldaddress such patents, whether we would sue on any such patents, or the outcome of any such suit.We may not be successful in securing or maintaining proprietary patent protection for products and technologies we develop or license. Moreover, if anypatents that are granted and listed in the Orange Book are successfully challenged by way of a Paragraph IV certification and subsequent litigation, theaffected product could more immediately face generic competition and its sales would likely decline materially. Should sales decline, we may have to writeoff a portion or all of the intangible assets associated with the affected product and our results of operations and cash flows could be materially and adverselyaffected.The patent protection and patent prosecution for some of our product candidates is dependent on third parties.While we normally seek and gain the right to fully prosecute the patents relating to our product candidates, there may be times when patents relating to ourproduct candidates are controlled by our licensors. This is the case with our agreements with Stanford and Nippon Kayaku, each of whom is primarilyresponsible for the prosecution of patents and patent applications licensed to us under the applicable collaboration agreements. If they or any of our futurelicensors fail to appropriately and broadly prosecute and maintain patent protection for patents covering any of our product candidates, our ability todevelop and commercialize those product candidates may be adversely affected and we may not be able to prevent competitors from making, using,importing, and selling competing products. In addition, even where we now have the right to control patent prosecution of patents and patent applications wehave licensed from third parties, we may still be adversely affected or prejudiced by actions or inactions of our licensors in effect from actions prior to usassuming control over patent prosecution.62 If we fail to comply with obligations in the agreements under which we license intellectual property and other rights from third parties or otherwiseexperience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.We are a party to a number of intellectual property license and supply agreements that are important to our business and expects to enter into additionallicense agreements in the future. Our existing agreements impose, and we expect that future license agreements will impose, various diligence, milestonepayment, royalty, purchasing, and other obligations on us. If we fail to comply with our obligations under these agreements, or we are subject to abankruptcy, our agreements may be subject to termination by the licensor, in which event we would not be able to develop, manufacture or market productscovered by the license or subject to supply commitments.Although we are not currently involved in any intellectual property litigation, we may be involved in lawsuits to protect or enforce our patents or thepatents of our licensors, which could be expensive, time consuming, and unsuccessful.Competitors may infringe our patents or the patents of our licensors. Although we are not currently involved in any intellectual property litigation, if we orone of our licensing partners were to initiate legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendantcould counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendantcounterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any ofseveral statutory requirements, including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegationthat someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution.The outcome following legal assertions of invalidity and unenforceability is unpredictable.Interference proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventions withrespect to our patents or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or toattempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commerciallyreasonable terms. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract ourmanagement and other employees. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise thefunds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties, or enter into developmentpartnerships that would help us bring our product candidates to market.Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of ourconfidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results ofhearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have amaterial adverse effect on the price of our common stock.We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information ofthird parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.We employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors orpotential competitors. Although we have written agreements and make every effort to ensure that our employees, consultants and independent contractors donot use the proprietary information or intellectual property rights of others in their work forums, and we are not currently subject to any claims that ouremployees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties, we may in the future besubject to such claims. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetarydamages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in defendingagainst such claims, litigation could result in substantial costs and be a distraction to management and other employees.63 We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting, and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States can be less extensive than those in the United States. Likewise, certain of our licenseagreements, for example for ubenimex, do not include patents or patent applications outside of the United States as our licensor elected not to file in foreignjurisdictions. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in theUnited States. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and mayalso export infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These productsmay compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systemsof certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual propertyprotection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing ofcompeting products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or notsuccessful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of beinginvalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may notprevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts toenforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property thatwe develop or license.Risks Related to our Business OperationsWe have previously identified a material weakness in our internal control over financial reporting and our current management team may fail to maintainan effective system of internal control, which may result in material misstatements of our financial statements or cause us to fail to meet our periodicreporting obligations as a public company.In connection with the audit of our consolidated financial statements for the years ended December 31, 2015 and 2014 as a private company, we and ourindependent auditors identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination ofdeficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the subject company’sannual or interim financial statements will not be prevented or detected on a timely basis. Our lack of sufficient accounting personnel resulted in theidentification of a material weakness in our internal control over financial reporting. Specifically, the material weakness that was identified related to a lackof sufficient accounting resources and personnel that had limited our ability to adequately segregate duties, perform sufficient review and approval of manualjournal entries posted to the general ledger, establish defined accounting policies and procedures or perform timely reviews of account reconciliations oraccounting estimates.During 2016 we implemented measures to improve our internal control over financing reporting to address the underlying causes of the previously identifiedmaterial weakness, including (i) the hiring of our Controller and other accounting personnel, (ii) establishing segregation of duties for review and approval ofmanual journal entries, (iii) establishing accounting policies and procedures, (iv) performing timely reviews of account reconciliations and accountingestimates, and (v) implementing appropriate disclosure controls and procedures. We believe the remediation steps outlined above were sufficient to remediatethe previously identified material weakness in internal control over financial reporting as discussed above.Our failure to implement and maintain effective internal control over financial reporting could result in errors in our financial statements that could result in arestatement of our financial statements or cause us to fail to meet our reporting obligations. In addition, although we are not currently required to formallytest our internal controls for attestation, we are required as an “emerging growth company” to report on our internal controls. After we are no longer anemerging growth company, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or the subsequent testing by ourindependent registered public accounting firm, may reveal deficiencies64 in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to ourconsolidated financial statements or identify other areas for further attention or improvement. Inadequate internal controls could also cause investors to loseconfidence in our reported financial information, which could have a negative effect on the trading price of our common stock.Our future success depends in part on our ability to retain our President and Chief Executive Officer and to attract, retain, and motivate other qualifiedpersonnel.We are highly dependent on David Cory, our President and Chief Executive Officer, the loss of whose services may adversely impact the achievement of ourobjectives. Mr. Cory could leave our employment at any time, as he is an “at will” employee. Recruiting and retaining other qualified employees,consultants, and advisors for our business, including scientific and technical personnel, will also be critical to our success. There is currently a shortage ofhighly qualified personnel in our industry, which is likely to continue. As a result, competition for personnel is intense and the turnover rate can be high. Wemay not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies forindividuals with similar skill sets. In addition, failure to succeed in development and commercialization of our product candidates may make it morechallenging to recruit and retain qualified personnel. The inability to recruit and retain qualified personnel, or the loss of the services of Mr. Cory mayimpede the progress of our research, development, and commercialization objectives and would negatively impact our ability to succeed in our in-licensingstrategy.We will need to expand our organization and we may experience difficulties in managing this growth, which could disrupt our operations.As of December 31, 2016, we had 20 full-time employees. As our development and commercialization plans and strategies develop, we expect to needadditional managerial, operational, manufacturing, sales, marketing, financial, legal, and other resources. Our management may need to divert adisproportionate amount of their attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities.We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, operational mistakes, loss ofbusiness opportunities, loss of employees, and reduced productivity among remaining employees. Our expected growth could require significant capitalexpenditures and may divert financial resources from other projects, such as the development of additional product candidates. If our management is unableto effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenue could be reduced and we maynot be able to implement our business strategy. Our future financial performance and our ability to commercialize product candidates and competeeffectively will depend, in part, on our ability to effectively manage any future growth.Failure in our information technology and storage systems could significantly disrupt the operation of our business.Our ability to execute our business plan and maintain operations depends on the continued and uninterrupted performance of our information technology, orIT, systems. IT systems are vulnerable to risks and damages from a variety of sources, including telecommunications or network failures, malicious humanacts and natural disasters. Moreover, despite network security and back-up measures, some of our and our vendors’ servers are potentially vulnerable tophysical or electronic break-ins, computer viruses and similar disruptive problems. Despite precautionary measures to prevent unanticipated problems thatcould affect our IT systems, sustained or repeated system failures that interrupt our ability to generate and maintain data could adversely affect our ability tooperate our business.65 We may not be successful in any efforts to identify, license, discover, develop or commercialize additional product candidates.Although a substantial amount of our effort will focus on the continued clinical testing, potential approval, and commercialization of our existing productcandidates, the success of our business is also expected to depend in part upon our ability to identify, license, discover, develop, or commercialize additionalproduct candidates. Research programs to identify new product candidates require substantial technical, financial, and human resources. We may focus ourefforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful. Our research programs or licensing efforts may failto yield additional product candidates for clinical development and commercialization for a number of reasons, including but not limited to the following: •our research or business development methodology or search criteria and process may be unsuccessful in identifying potential productcandidates; •we may not be able or willing to assemble sufficient resources to acquire or discover additional product candidates; •our product candidates may not succeed in preclinical or clinical testing; •our potential product candidates may be shown to have harmful side effects or may have other characteristics that may make the productsunmarketable or unlikely to receive marketing approval; •competitors may develop alternatives that render our product candidates obsolete or less attractive; •product candidates we develop may be covered by third parties’ patents or other exclusive rights; •the market for a product candidate may change during our program so that such a product may become unreasonable to continue to develop; •a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and •a product candidate may not be accepted as safe and effective by patients, the medical community, or third-party payors.If any of these events occur, we may be forced to abandon our development efforts for a program or programs, or we may not be able to identify, license,discover, develop, or commercialize additional product candidates, which would have a material adverse effect on our business and could potentially causeus to cease operations.Healthcare legislative reform measures may have a material adverse effect on our business and results of operations.In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in March 2010, thePatient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or the ACA, was passed, which substantiallychanges the way health care is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry. In January2017, Congress voted to adopt a budget resolution for fiscal year 2017, or the Budget Resolution, that authorizes the implementation of legislation thatwould repeal portions of the ACA. Further, on January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities andresponsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal orregulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. Congress also couldconsider subsequent legislation to replace elements of the ACA that are repealed. We expect that additional state and federal healthcare reform measures willbe adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which couldresult in reduced demand or lower pricing for our product candidates, or additional pricing pressures.66 We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, and health information privacy andsecurity laws. If we are unable to comply, or has not fully complied, with such laws, it could face substantial penalties.If we obtain FDA approval for any of our product candidates and begins commercializing those products in the United States, our operations may be subjectto various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act, and physiciansunshine laws and regulations. These laws may impact, among other things, our proposed sales, marketing, and education programs. In addition, we may besubject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability tooperate include: •the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offeringor paying remuneration, directly or indirectly, to induce, or in return for, the purchase or recommendation of an item or service reimbursableunder a federal healthcare program, such as the Medicare and Medicaid programs; •federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities fromknowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false orfraudulent; •the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibitexecuting a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters; •HIPAA, as amended by the Health Information Technology and Clinical Health Act, or HITECH, and our implementing regulations, whichimposes certain requirements relating to the privacy, security, and transmission of individually identifiable health information; •The Physician Payments Sunshine Act requires manufacturers of drugs, devices, biologics, and medical supplies to report annually to the U.S.Department of Health and Human Services information related to payments and other transfers of value to physicians, other healthcareproviders, and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and theirimmediate family members and applicable group purchasing organizations; and •state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or servicesreimbursed by any third-party payors, including commercial insurers, state laws that require pharmaceutical companies to comply with thepharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government,or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require drugmanufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers ormarketing expenditures, and state laws governing the privacy and security of health information in certain circumstances, many of whichdiffer from each other in significant ways and may not have the same effect, thus complicating compliance efforts.Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our businessactivities could be subject to challenge under one or more of such laws. In addition, recent health care reform legislation has strengthened these laws.If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply, we may be subject topenalties, including civil and criminal penalties, damages, fines, exclusion from participation in government health care programs, such as Medicare andMedicaid, imprisonment, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business andour results of operations.67 Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.We are exposed to the risk of fraudulent conduct or other illegal activity by our employees, independent contractors, principal investigators, consultants,commercial partners and vendors. Misconduct by these parties could include intentional, reckless and/or negligent conduct that fails to: comply with theregulations of the FDA and non-U.S. regulators, provide accurate information to the FDA and non-U.S. regulators, comply with healthcare fraud and abuselaws in the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us. In particular, promotion, sales,marketing and certain business arrangements in the healthcare industry are subject to extensive laws intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission,customer incentive programs and other business arrangements. Such misconduct could also involve the improper use of information obtained in the course ofpatient recruitment or clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation. We have adopted a code of businessconduct and ethics applicable to all of our employees, but it is not always possible to identify and deter employee misconduct, and the precautions we take todetect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmentalinvestigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, andwe are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the impositionof significant fines or other sanctions.We face potential product liability, and, if successful claims are brought against us, we may incur substantial liability and costs. If the use or misuse of ourproduct candidates harm patients, or is perceived to harm patients even when such harm is unrelated to our product candidates, our regulatory approvalscould be revoked or otherwise negatively impacted and we could be subject to costly and damaging product liability claims.The use or misuse of our product candidates in clinical trials and the sale of any products for which we obtain marketing approval exposes us to the risk ofproduct liability claims. Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or others sellingor otherwise coming into contact with our products. There is a risk that our product candidates may induce adverse events. If we cannot successfully defendagainst product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claimsmay result in: •impairment of our business reputation; •initiation of investigations by regulators; •withdrawal of clinical trial participants; •costs due to related litigation; •distraction of management’s attention from our primary business; •substantial monetary awards to patients or other claimants; •the inability to commercialize our product candidates; •product recalls, withdrawals or labeling, marketing or promotional restrictions; and •decreased demand for our product candidates, if approved for commercial sale.We believe our current product liability insurance coverage is appropriate in light of our clinical programs; however, we may not be able to maintaininsurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If and when we obtain marketing approval forproduct candidates, we intend to increase our insurance coverage to include the sale of commercial products; however, we may be unable to obtain productliability insurance on commercially reasonable terms or in adequate amounts. On occasion, large judgments have been awarded in class action lawsuits basedon drugs or medical treatments that had unanticipated adverse effects. A successful product liability claim or series of claims brought against us could causeour stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business.68 Patients with the diseases targeted by our product candidates are often already in severe and advanced stages of disease and have both known and unknownsignificant pre-existing and potentially life-threatening health risks. During the course of treatment, patients may suffer adverse events, including death, forreasons that may or may not be related to our product candidates. Such events could subject us to costly litigation, require us to pay substantial amounts ofmoney to injured patients, delay, negatively impact or end our opportunity to receive or maintain regulatory approval to market our products, or require us tosuspend or abandon our commercialization efforts. Even in a circumstance in which we do not believe that an adverse event is related to our products, theinvestigation into the circumstance may be time-consuming or inconclusive. These investigations may interrupt our sales efforts, delay our regulatoryapproval process in other countries, or impact and limit the type of regulatory approvals our product candidates receive or maintain. As a result of thesefactors, a product liability claim, even if successfully defended, could have a material adverse effect on our business, financial condition or results ofoperations.If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that couldhave a material adverse effect on the success of our business.Our research and development activities and our third-party manufacturers’ and suppliers’ activities involve the controlled storage, use, and disposal ofhazardous materials, including the components of our product candidates and other hazardous compounds. We and our manufacturers and suppliers aresubject to laws and regulations governing the use, manufacture, storage, handling, and disposal of these hazardous materials. In some cases, these hazardousmaterials and various wastes resulting from their use are stored at our and our manufacturers’ facilities pending their use and disposal. We cannot eliminatethe risk of contamination, which could cause an interruption of our commercialization efforts, research and development efforts and business operations,environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling, and disposal ofthese materials and specified waste products. Although we believe that the safety procedures utilized by our licensors and our third-party manufacturers forhandling and disposing of these materials generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that this is thecase or eliminate the risk of accidental contamination or injury from these materials. In such an event, we may be held liable for any resulting damages andsuch liability could exceed our resources and state or federal or other applicable authorities may curtail our use of certain materials and/or interrupt ourbusiness operations. Furthermore, environmental laws and regulations are complex, change frequently, and have tended to become more stringent. We cannotpredict the impact of such changes and cannot be certain of our future compliance. We do not currently carry biological or hazardous waste insurancecoverage.We are currently conducting and will continue to conduct clinical trials in foreign countries, which could expose us to risks that could have a materialadverse effect on the success of our business and the delivery of clinical trial data.We currently conduct clinical trials in the United States; Ankara, Turkey; Hannover, Germany; Karachi, Pakistan; Auckland, New Zealand and TelAviv/Beersheba, Israel, and accordingly, we are subject to risks associated with doing business globally, including commercial, political, and financial risks.Emerging regions, such as Eastern Europe, Latin America, Asia, and Africa, as well as more developed markets, such as the United Kingdom, France,Germany, and Australia, provide clinical study opportunities for us. In addition, we are subject to potential disruption caused by military conflicts;potentially unstable governments or legal systems; civil or political upheaval or unrest; local labor policies and conditions; possible expropriation,nationalization, or confiscation of assets; problems with repatriation of foreign earnings; economic or trade sanctions; closure of markets to imports; anti-American sentiment; terrorism or other types of violence in or outside the United States; health pandemics; and a significant reduction in global travel. Forexample, Turkey is a key region for clinical activity relating to Hepatitis Delta, and further outbreaks of violence and political instability in the region coulddisrupt our clinical operations. Our success will depend, in part, on our ability to overcome the challenges we encounter with respect to these risks and otherfactors affecting U.S. companies with global operations. If our global clinical trials were to experience significant disruption due to these risks or for otherreasons, it could have a material adverse effect on our financial results.69 We or the third parties upon whom we depend may be adversely affected by earthquakes or other natural disasters and our business continuity and disasterrecovery plans may not adequately protect us from a serious disaster.Our corporate headquarters are located in the San Francisco Bay Area which has in the past experienced severe earthquakes and other natural disasters. We donot carry earthquake insurance. Earthquakes or other natural disasters could severely disrupt our operations or those of our collaborators, and have a materialadverse effect on our business, results of operations, financial condition, and prospects. If a natural disaster, terrorist attack, power outage, or other eventoccurred that prevented us from using or damaged critical elements of our business and operations (such as the manufacturing facilities of our third-partycontract manufacturers) our business may be disrupted for a substantial period of time. We have limited or no disaster recovery and business continuity plansin place currently and our business would be impaired in the event of a serious disaster or similar event. We may incur substantial expenses to develop andimplement any disaster recovery and business continuity plans, which could have a material adverse effect on our business.Risks Related to Celladon’s Historical Business OperationsWe are the subject of securities class action lawsuits that were filed against Celladon in 2015, and additional securities litigation may be brought againstus in the future. In July 2015, following Celladon’s announcements of the negative CUPID 2 data and the suspension of further research and development activities and thesubsequent declines of the price of its common stock, three putative class actions were filed in the U.S. District Court for the Southern District of Californiaagainst Celladon and certain of its current and former officers. The complaints generally alleged that the defendants violated Sections 10(b) and 20(a) of theSecurities Exchange Act of 1934, as amended, or the Exchange Act, by making materially false and misleading statements regarding the clinical trial programfor MYDICAR, thereby artificially inflating the price of Celladon’s common stock. The complaints sought unspecified monetary damages and other relief,including attorneys’ fees. On December 9, 2015, the district court consolidated the three putative securities class actions and appointed a lead plaintiff torepresent the putative class. The lead plaintiff filed a consolidated amended complaint on February 29, 2016. On October 7, 2016, the district court granted defendants’ motion to dismiss the consolidated amended complaint and granted leave to amend within 60 daysfrom the date of the district court’s order. The lead plaintiff subsequently filed a notice of intent not to amend the consolidated amended complaint andinstead indicated that it intended to appeal the district court’s decision. On December 9, 2016, the district court closed the case. On December 28, 2016, the lead plaintiff filed a notice to the United States Court of Appeals for the Ninth Circuit appealing the district court’s orderdismissing the consolidated amended complaint. The deadline to file the appellant’s opening brief is April 7, 2017. It is possible that additional suits will be filed, or allegations made by stockholders, with respect to these same or other matters and also naming us and/or ourformer officers and directors as defendants. We believe that we have meritorious defenses and intend to defend these lawsuits vigorously. Due to the earlystage of these proceedings, we are not able to predict or reasonably estimate the ultimate outcome or possible losses relating to these claims. While we andCelladon’s former directors and officers have a separate liability insurance policy dedicated to any claims that may arise from premerger events, there is noassurance that the coverage will be sufficient. In addition, any such litigation could result in substantial costs and a diversion of our management’s attentionand resources, which could harm our business. 70 Risks Related to Ownership of our Common StockThe market price of our common stock may be highly volatile, and you may not be able to resell some or all of your shares at a desired market price.The market price of our common stock has been and is likely to continue to be volatile. Our stock price could be subject to wide fluctuations in response to avariety of factors, including the following: •results or delays in preclinical studies or clinical trials; •our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial; •unanticipated serious safety concerns related to the use of any of our product candidates; •reports of adverse events in other gene therapy products or clinical trials of such products; •inability to obtain additional funding; •any delay in filing an IND or NDA for any of our product candidates and any adverse development or perceived adverse development withrespect to the FDA’s review of that IND or NDA; •our ability to obtain regulatory approvals for LNF or other product candidates, and delays or failures to obtain such approvals; •failure of any of our product candidates, if approved, to achieve commercial success; •failure to obtain orphan drug designation; •failure to maintain our existing third-party license and supply agreements; •failure by our licensors to prosecute, maintain, or enforce our intellectual property rights; •changes in laws or regulations applicable to our product candidates; •any inability to obtain adequate supply of our product candidates or the inability to do so at acceptable prices; •adverse regulatory authority decisions; •introduction of new products, services, or technologies by our competitors; •failure to meet or exceed financial and development projections we may provide to the public; •failure to meet or exceed the financial and development projections of the investment community; •the perception of the pharmaceutical industry by the public, legislatures, regulators, and the investment community; •announcements of significant acquisitions, strategic partnerships, joint ventures, or capital commitments by us or our competitors; •disputes or other developments relating to proprietary rights, including patents, litigation matters, and our ability to obtain patent protectionfor our technologies; •additions or departures of key personnel; •significant lawsuits, including patent or stockholder litigation; •if securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinionsregarding our business and stock; •changes in the market valuations of similar companies; •general market or macroeconomic conditions; •sales of our common stock by us or our stockholders in the future;71 •trading volume of our common stock; •announcements by commercial partners or competitors of new commercial products, clinical progress or the lack thereof, significantcontracts, commercial relationships or capital commitments; •adverse publicity relating to the hepatitis market generally, including with respect to other products and potential products in such markets; •the introduction of technological innovations or new therapies that compete with potential products of ours; •changes in the structure of health care payment systems; and •period-to-period fluctuations in our financial results.Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individualcompanies. These broad market fluctuations may also adversely affect the trading price of our common stock.In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigationagainst those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which couldsignificantly harm our profitability and reputation.We will incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies.We have incurred and will continue to incur significant legal, accounting and other expenses associated with public company reporting requirements. Wealso incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act, as well as rules implemented bythe SEC and The NASDAQ Stock Market LLC. These rules and regulations impose significant legal and financial compliance costs and make some activitiesmore time-consuming and costly. For example, our management team consists of certain executive officers who have not previously managed and operated apublic company. These executive officers and other personnel will need to devote substantial time to gaining expertise regarding operations as a publiccompany and compliance with applicable laws and regulations. In addition, it may be more difficult for us to attract and retain qualified individuals to serveon our board of directors or as executive officers, which may adversely affect investor confidence and could cause our business or stock price to suffer.Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult and may prevent attempts byour stockholders to replace or remove our management.Provisions in our certificate of incorporation and bylaws may delay or prevent an acquisition or a change in management. These provisions include aclassified board of directors, a prohibition on actions by written consent of our stockholders and the ability of the board of directors to issue preferred stockwithout stockholder approval. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the DGCL, whichprohibits stockholders owning in excess of 15% of our voting stock from merging or combining with us. Although we believe these provisions collectivelywill provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our board of directors, they would apply even if theoffer may be considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace orremove then current management by making it more difficult for stockholders to replace members of the board of directors, which is responsible forappointing the members of management.We do not anticipate that we will pay any cash dividends in the foreseeable future.We expect to retain our future earnings to fund the development and growth of our business. As a result, capital appreciation, if any, of our common stockwill be the sole source of gain for our stockholders, if any, for the foreseeable future.72 Future sales of shares by existing stockholders could cause our stock price to decline.If existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after legal restrictions on resalelapse, the trading price of our common stock could decline. Certain of our existing stockholders, including Vivo Ventures Fund VI, L.P. and InterwestPartners X, L.P., and their respective affiliated entities, own substantial ownership interest in our common stock and any decision to sell a significant numberof shares may negatively impact the price of our common stock.The ownership of our common stock is highly concentrated, and it may prevent stockholders from influencing significant corporate decisions and mayresult in conflicts of interest that could cause our stock price to decline.Our executive officers, directors and 5% stockholders and their affiliates beneficially own or control a significant portion of the outstanding shares of ourcommon stock. Accordingly, these executive officers, directors, 5% stockholders and their affiliates, acting as a group, have substantial influence over theoutcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially allof our assets or any other significant corporate transactions. These stockholders may also delay or prevent a change of control of us, even if such a change ofcontrol would benefit our other stockholders. The significant concentration of stock ownership may adversely affect the trading price of our common stockdue to investors’ perception that conflicts of interest may exist or arise.Because the recent Merger resulted in an ownership change under Section 382 of the Internal Revenue Code our net operating loss carryforwards andcertain other tax attributes are now subject to limitations.If a corporation undergoes an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended, or Section 382, thecorporation’s net operating loss carryforwards and certain other tax attributes arising from before the ownership change are subject to limitations on use afterthe ownership change. In general, an ownership change occurs if there is a cumulative change in the corporation’s equity ownership by certain stockholdersthat exceeds fifty percentage points over a rolling three-year period. Similar rules may apply under state tax laws. The recent Merger resulted in an ownershipchange and, accordingly, both parties’ net operating loss carryforwards and certain other tax attributes will be subject to further limitations on their use. Weassessed whether Eiger had an ownership change, as defined by Section 382 of the Code, occurred from our formation through December 31, 2016. Basedupon this assessment no reduction was made to the federal and state NOL carryforwards or federal and state tax credit carryforwards under these rules.Additional ownership changes in the future could result in additional limitations on the combined organization’s net operating loss carryforwards.Consequently, even if we achieve profitability, we may not be able to utilize a material portion of our net operating loss carryforwards and other taxattributes, which could have a material adverse effect on cash flow and results of operations. ITEM 1B. Unresolved Staff CommentsNot applicable.ITEM 2. PropertiesOur corporate headquarters are located at 350 Cambridge Avenue, Suite 350, Palo Alto, California 94306 in a facility we lease encompassing approximately1,570 square feet of office space. In December 2015, we entered into a sublease for 4,029 square feet of additional office space located at 366 CambridgeAvenue in Palo Alto, California 94306. The sublease commenced on January 26, 2016 and expires on March 30, 2017. In October 2016, the lease wasmodified to include two additional suites, 125 and 130 bringing our total leased space at 350 Cambridge Avenue to 3,877 square feet. The modified lease forthis office space commenced on January 4, 2017 and expires in March 2018, has one two-year renewal option prior to expiration and includes rent escalationclauses through the lease term.73 ITEM 3. Legal ProceedingsIn July 2015, following Celladon’s announcements of the negative CUPID 2 data and the suspension of further research and development activities and thesubsequent declines of the price of its common stock, three putative class actions were filed in the U.S. District Court for the Southern District of Californiaagainst Celladon and certain of its current and former officers. The complaints generally alleged that the defendants violated Sections 10(b) and 20(a) of theSecurities Exchange Act of 1934, as amended, or the Exchange Act, by making materially false and misleading statements regarding the clinical trial programfor MYDICAR, thereby artificially inflating the price of Celladon’s common stock. The complaints sought unspecified monetary damages and other relief,including attorneys’ fees. On December 9, 2015, the district court consolidated the three putative securities class actions and appointed a lead plaintiff torepresent the putative class. The lead plaintiff filed a consolidated amended complaint on February 29, 2016.On October 7, 2016, the district court granted defendants’ motion to dismiss the consolidated amended complaint and granted leave to amend within 60 daysfrom the date of the district court’s order. The lead plaintiff subsequently filed a notice of intent not to amend the consolidated amended complaint andinstead indicated that it intended to appeal the district court’s decision. On December 9, 2016, the district court closed the case.On December 28, 2016, the lead plaintiff filed a notice to the United States Court of Appeals for the Ninth Circuit appealing the district court’s orderdismissing the consolidated amended complaint. The deadline to file the appellant’s opening brief is April 7, 2017. It is possible that additional suits will be filed, or allegations made by stockholders, with respect to these same or other matters and also naming us and/or ourformer officers and directors as defendants. We believe that we have meritorious defenses and intend to defend these lawsuits vigorously. Due to the earlystage of these proceedings, we are not able to predict or reasonably estimate the ultimate outcome or possible losses relating to these claims. While we andCelladon’s former directors and officers have a separate liability insurance policy dedicated to any claims that may arise from premerger events, there is noassurance that the coverage will be sufficient. In addition, any such litigation could result in substantial costs and a diversion of our management’s attentionand resources, which could harm our business.ITEM 4. Mine Safety DisclosuresNot applicable. 74 PART IIITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket InformationOn March 22, 2016, Celladon and Private Eiger completed the Merger. Immediately prior to the Merger, Celladon completed a 1-for-15 reverse stock split.Following the Merger, we changed the name of the combined company to Eiger BioPharmaceuticals, Inc. and changed the symbol to “EIGR.” Our commonstock originally began trading on The NASDAQ Global Market on January 30, 2014. Prior to January 30, 2014, there was no public market for our commonstock. The following table sets forth the high and low sales prices per share of our common stock as reported on The NASDAQ Global Market for the periodindicated, adjusted for the reverse stock split. Price Range High Low Year Ended December 31, 2016 First Quarter $25.80 $12.90 Second Quarter $23.10 $17.06 Third Quarter $20.63 $13.15 Fourth Quarter $14.75 $10.71 Year Ended December 31, 2015 First Quarter $423.73 $226.34 Second Quarter $299.69 $18.60 Third Quarter $20.70 $15.00 Fourth Quarter $28.35 $15.00Holders of RecordAs of March 16, 2017, there were approximately 29 stockholders of record of our common stock. Certain shares are held in “street” name and accordingly, thenumber of beneficial owners of such shares is not known or included in the foregoing number.Dividend PolicyWe have never declared or paid any dividends on our common stock. We currently intend to retain all available funds and future earnings, if any, to fund thedevelopment and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination to paydividends, if permitted, will be made at the discretion of our board of directors.ITEM 6. Selected Financial DataAs a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, the Company is not required to provide this information. 75 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsYou should read the following discussion and analysis together with our financial statements and related notes included elsewhere in this Annual Report.The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from thoseexpressed or implied in any forward-looking statements as a result of various factors, including those set forth under the caption “Item 1A. Risk Factors.”Unless otherwise indicates, references to the terms the “combined company,” “Eiger,” the “Company,” “we,” “our” and “us” refer to EigerBioPharmaceuticals, Inc. (formerly known as Celladon Corporation) and its subsidiaries after the merger described herein. The term “Private Eiger” refersto privately-held Eiger BioPharmaceuticals, Inc. prior to its merger with Celladon Merger Sub, Inc. a wholly-owned subsidiary of Celladon Corporation.The term “Celladon” refers to Celladon Corporation and its subsidiaries prior to the Merger.IntroductionWe are a clinical stage biopharmaceutical company focused on bringing to market novel product candidates for the treatment of orphan diseases. Since ourfounding in 2008, we have worked with investigators at Stanford University and evaluated a number of potential development candidates frompharmaceutical companies to comprise a pipeline of novel product candidates. Our resulting pipeline includes four Phase 2 candidates addressing fourdistinct orphan diseases. The programs have several aspects in common: the disease targets represent conditions of high medical need which are inadequatelytreated by current standard of care; the therapeutic approaches are supported by an understanding of disease biology and mechanism as elucidated by ouracademic research relationships; prior clinical experience with the product candidates guides an understanding of safety; and the development paths leveragethe experience and capabilities of our experienced, commercially focused management team. The pipeline includes lonafarnib for Hepatitis Delta Virus, orHDV, lambda for HDV, exendin 9-39 for PBH and ubenimex for PAH and lymphedema. We plan to deliver data from all ongoing Phase 2 clinical trials overthe course of the next eighteen months.We have no products approved for commercial sale and have not generated any revenue from product sales. We have never been profitable and have incurredoperating losses in each year since inception. Our net losses were $47.1 million, $13.3 million and $1.5 million for the years ended December 31, 2016, 2015and 2014, respectively. As of December 31, 2016, we had an accumulated deficit of $76.4 million. Substantially all of our operating losses resulted fromexpenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations.We expect to incur significant expenses and increasing operating losses for at least the next several years as we initiate and continue the clinicaldevelopment of, and seek regulatory approval for, our product candidates and add personnel necessary to operate as a public company with an advancedclinical candidate pipeline of products. In addition, we are now operating as a publicly traded company following the reverse merger with Celladon, and wewill be hiring additional financial and other personnel, upgrading our financial information systems and incurring costs associated with operating as a publiccompany. We expect that our operating losses will fluctuate significantly from quarter to quarter and year to year due to timing of clinical developmentprograms and efforts to achieve regulatory approval.Merger with CelladonOn March 22, 2016, we completed the reverse merger between Private Eiger and Celladon in accordance with the terms of the Agreement and Plan of Merger,dated as of November 18, 2015, by and among Private Eiger, Celladon and Celladon Merger Sub, Inc., or the Merger. Also on March 22, 2016, in connectionwith, and prior to the completion of the Merger, we effected a fifteen for one reverse stock split of our common stock, or the Reverse Stock Split, and changedour name to “Eiger BioPharmaceuticals, Inc.”On November 18, 2015, in connection with the Merger, we entered into a subscription agreement, or the “Subscription Agreement” with investors for the saleof shares of our common stock, or the “Private Placement”, which closed on March 22, 2016.76 Immediately prior to and in connection with the Merger, each share of Private Eiger’s preferred stock outstanding was converted into shares of Private Eiger’scommon stock at an exchange ratio of one share of common stock for each share of preferred stock.Under the terms of the Merger Agreement, at the effective time of the Merger, Celladon issued shares of common stock to Private Eiger stockholders, at anexchange ratio of approximately 0.09 shares of common stock, after taking into account the Reverse Stock Split, in exchange for each share of Private Eiger’scommon stock outstanding immediately prior to the Merger. The exchange ratio was calculated by a formula that was determined through arms-lengthnegotiations between Celladon and Private Eiger. Immediately after the Merger, the former Private Eiger equity holders beneficially owned approximately78% of post-merger Eiger’s common stock. The Merger was accounted for as a reverse asset acquisition.Financial Operations OverviewResearch and Development ExpensesResearch and development expenses represent costs incurred to conduct research and development, such as the development of our product candidates. Werecognize all research and development costs as they are incurred. Research and development expenses consist primarily of the following: •expenses incurred under agreements with consultants and clinical trial sites that conduct research and development activities on our behalf; •laboratory and vendor expenses related to the execution of clinical trials; •contract manufacturing expenses, primarily for the production of clinical supplies; •license fees associated with our license agreements; and •internal costs that are associated with activities performed by our research and development organization and generally benefit multipleprograms. These costs are not separately allocated by product candidate. Unallocated internal research and development costs consistprimarily of: •personnel costs, which include salaries, benefits and stock-based compensation expense; •allocated facilities and other expenses, which include expenses for rent and maintenance of facilities and depreciation expense; and •regulatory expenses and technology license fees related to development activities.The largest component of our operating expenses has historically been the investment in research and development activities. However, we do not allocateinternal research and development costs, such as salaries, benefits, stock-based compensation expense and indirect costs to product candidates on a program-specific basis. The following table shows our research and development expenses for the years ended December 31, 2016, 2015 and 2014 (in thousands): Year Ended December 31, 2016 2015 2014 Product candidates: LNF HDV $5,237 $2,052 $515 Lambda HDV 7,244 — — Exendin 9-39 PBH 2,984 115 — Ubenimex PAH 10,393 648 — Ubenimex Lymphedema 2,271 198 — Internal research and development costs 4,885 5,104 129 Total research and development expense $33,014 $8,117 $644 77 We expect research and development expenses will increase in the future as we advance our product candidates into and through later stage clinical trials andpursue regulatory approvals, which will require a significant investment in regulatory support and contract manufacturing and inventory build-up relatedcosts. In addition, we continue to evaluate opportunities to acquire or in-license other product candidates and technologies, which may result in higherresearch and development expenses due to license fee and/or milestone payments.The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in timely developingand achieving regulatory approval for our product candidates. The probability of success of our product candidates may be affected by numerous factors,including clinical data, competition, intellectual property rights, manufacturing capability and commercial viability. As a result, we are unable to determinethe duration and completion costs of our development projects or when and to what extent we will generate revenue from the commercialization and sale ofany of our product candidates.General and Administrative ExpensesGeneral and administrative expenses consist of personnel costs, allocated expenses and expenses for outside professional services, including legal, audit,accounting services and investor relations. Personnel costs consist of salaries, benefits and stock-based compensation. Allocated expenses consist of facilitiesand other expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation expense and other supplies. During theyear ended December 31, 2016, we incurred incremental expenses as a result of the Merger and additional expenses as a result of becoming a public companyfollowing completion of the Merger, including expenses related to compliance with the rules and regulations of the SEC and NASDAQ, additional insurance,investor relations and other administrative expenses and professional services.Interest ExpenseInterest expense consists of interest and amortization of the debt discount related to the outstanding convertible promissory notes issued in November 2015and then converted into common stock in March 2016, or the Notes.Other expense, netOther expense, net consists of the change in fair value of the obligation to issue common stock to Eiccose and the change in fair value of warrant liability.The change in fair value of the obligation to issue common stock to Eiccose was related to our obligation to issue shares to Eiccose upon the closing of thenext round of financing that resulted in at least $25.0 million in gross proceeds to us. Upon the closing of the Private Placement on March 22, 2016, weissued to Eiccose 96,300 fully vested shares of our common stock in settlement of this obligation. In connection with this transaction we remeasured the fairvalue of the obligation to issue common stock at the settlement date and the change in fair value of $0.2 million was recognized within other expense, netduring the year ended December 31, 2016. Upon the settlement of the obligation with the issuance of shares on March 22, 2016, the liability was reclassifiedto common stock and additional paid-in capital within stockholders’ equity.In connection with our issuance of the Notes, we issued warrants to the noteholders to purchase shares of our common stock at an exercise price of $0.11 pershare, on a post-Merger and post-Reverse Stock Split basis, or the Warrants. The number of shares into which the Warrants could be exercised was equal to thewarrant coverage amount divided by the per share price of the equity securities sold in a qualified financing and thus was accounted for as a liability. Uponthe closing of the Private Placement on March 22, 2016, the number of shares of common stock issuable upon exercise of the Warrants was fixed and the fairvalue remeasured at that date, and the warrants were automatically exercised. During the year ended December 31, 2016, we recognized a loss related to thechange in fair value of the warrant liability of $0.2 million. The warrant liability was reclassified to common stock and additional paid-in capital withinstockholders’ equity, upon the exercise of the Warrants and issuance of shares on March 22, 2016.78 Critical Accounting Policies and EstimatesOur management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which havebeen prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us tomake estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates andjudgments. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. Theseestimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are notreadily apparent from other sources. Actual results may differ materially from these estimates. We believe that the accounting policies discussed below arecritical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments andestimates.Accrued Research and Development ExpensesWe record accrued expenses for estimated costs of research and development activities conducted by external service providers, which include the conduct ofclinical research and contract formulation and manufacturing activities. We record the estimated costs of development activities based upon the estimatedamount of services provided but not yet invoiced, and include these costs in accrued liabilities in the consolidated balance sheet and within developmentexpense in the consolidated statement of operations. We record accrued expenses for these costs based on the estimated amount of work completed and inaccordance with agreements established with these external service providers.We estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage ofcompletion of the services and the agreed-upon fee to be paid for such services. We make judgments and estimates in determining the accrued balance ineach reporting period. As actual costs become known, we adjust our accrued estimates.Stock-Based CompensationWe recognize compensation costs related to stock options granted to employees based on the estimated fair value of the awards on the date of grant, net ofestimated forfeitures. We estimate the grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option-pricingmodel. The grant date fair value of the stock-based awards is generally recognized on a straight-line basis over the requisite service period, which is generallythe vesting period of the respective awards.The Black-Scholes option-pricing model requires the use of highly subjective assumptions, which determine the fair value of stock-based awards. Theseassumptions include:Expected Term. Our expected term represents the period that our stock-based awards are expected to be outstanding and is determined using thesimplified method (based on the mid-point between the vesting date and the end of the contractual term).Expected Volatility. Since we have only been publicly traded for a short period and do not have adequate trading history for our common stock, theexpected volatility was estimated based on the average volatility for comparable publicly traded biopharmaceutical companies over a period equalto the expected term of the stock option grants. The comparable companies were chosen based on their similar size, stage in the life cycle, or area ofspecialty.Risk-Free Interest Rate. The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periodscorresponding with the expected term of option.Expected Dividend. We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, weused an expected dividend yield of zero.In addition to the Black-Scholes assumptions, we estimate our forfeiture rate based on an analysis of our actual forfeitures and will continue to evaluate theadequacy of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover behavior, and other factors. The impact from anyforfeiture rate adjustment would be recognized in full in the period of adjustment and if the actual number of future forfeitures differs from our estimates, wemight be required to record adjustments to stock-based compensation in future periods.79 Prior to the completion of the Merger in March 2016, the fair value of the shares of common stock underlying our share-based awards were estimated on eachgrant date by our Board of Directors. In order to determine the fair value of our common stock underlying option grants, our Board of Directors considered,among other things, timely valuations of our common stock prepared by an unrelated third-party valuation firm in accordance with the guidance provide bythe American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.Given the absence of a public trading market for our common stock, our Board of Directors exercised reasonable judgment and considered a number ofobjective and subjective factors to determine the best estimate of the fair value of our common stock, including our stage of development; progress of ourresearch and development efforts; the rights, preferences and privileges of our preferred stock relative to those of our common stock; equity marketconditions affecting comparable public companies and the lack of marketability of our common stock. After the completion of the Merger, our Board ofDirectors determined the fair value of each share of underlying common stock based on the closing price of our common stock as reported by the NASDAQGlobal Market on the date of grant.Results of OperationsComparison of the Years Ended December 31, 2016 and 2015The following table summarizes results of operations for the years ended December 31, 2016 and 2015 (in thousands): Years EndedDecember 31, Increase /(Decrease) %Change 2016 2015 Operating expenses: Research and development $33,014 $8,117 $24,897 307%General and administrative 13,106 4,855 8,251 170%Total operating expenses 46,120 12,972 33,148 Loss from operations (46,120) (12,972) (33,148) Interest expense (690) (350) (340) 97%Other expense, net (277) — (277) 100%Net loss $(47,087) $(13,322) $(33,765) Research and development expensesResearch and development expenses increased by $24.9 million to $33.0 million for the year ended December 31, 2016, from $8.1 million for the sameperiod in 2015. The increase was primarily due to a $15.0 million increase in clinical expenditures due to increased program activity, a $5.2 million expenserelated to upfront payments under our License Agreement with Bristol-Meyers Squibb Company (the BMS License Agreement), a $2.2 million increase incompensation and personnel related expenses and a $0.7 million increase in stock-based compensation expense due to an increase in headcount, a $1.6million increase in consulting fees related to increased program activity and a $0.2 million increase in facility related and insurance expenses.General and administrative expensesGeneral and administrative expenses increased by $8.3 million to $13.1 million for the year ended December 31, 2016, from $4.9 million for the same periodin 2015. The increase was primarily due to a $3.4 million increase in consulting, advisory, legal and accounting services incurred in connection with theMerger with Celladon and being a public company, a $2.3 million increase in stock-based compensation expense and a $1.4 million increase incompensation and personnel related expenses due to an increase in headcount, a $0.6 million increase in litigation expenses related to the Celladonshareholder law suit and a $0.5 million increase in facility related and insurance expenses.80 Interest expense, netInterest expense increased by $0.3 million to $0.7 million for the year ended December 31, 2016, from $0.4 million for the same period in 2015. Interestexpense consisted of interest and amortization of the debt discount related to the Notes outstanding prior to their conversion into common stock in March2016. The increase was primarily due to a longer outstanding period in 2016 compared to 2015.Other expenses, netOther expense, net of $0.3 million for the year ended December 31, 2016, primarily consists of the change in fair value of the obligation to issue commonstock to Eiccose and the change in fair value of warrant liability. We did not have any such items outstanding during the year ended December 31, 2015. Comparison of the Years Ended December 31, 2015 and 2014The following table summarizes results of operations for the years ended December 31, 2015 and 2014 (in thousands): Years EndedDecember 31, Increase /(Decrease) %Change 2015 2014 Operating expenses: Research and development $8,117 $644 $7,473 1160%General and administrative 4,855 872 3,983 457%Total operating expenses 12,972 1,516 11,456 Loss from operations (12,972) (1,516) (11,456) Interest expense (350) — (350) 100%Net loss $(13,322) $(1,516) $(11,806) Research and developmentResearch and development expenses increased by $7.5 million to $8.1 million for the year ended December 31, 2015 from $0.6 million for the same period in2014. The increase was primarily due to a $1.7 million expense related to the fair value of the Company’s obligation to issue common stock, the license feesand other expenses incurred in connection with the Eiccose purchase agreement, a $2.5 million increase in clinical expenditures due to increased programactivity, a $1.1 million increase in costs to third-party consultants, a $1.1 million increase in personnel related costs due to increase in headcount, a $1.0million milestone payment in May 2015 under the Merck license agreement related to the achievement of a development milestone related to clinical trials.General and administrativeGeneral and administrative expenses increased by $4.0 million to $4.9 million for the year ended December 31, 2015 from $0.9 million for the same period in2014. The increase was primarily due to a $2.5 million increase in consulting, advisory, legal and accounting services incurred in connection with the Mergerwith Celladon, patent related matters and various business development activities, a $1.4 million increase in personnel related costs due to an increase inheadcount, and $0.1 million in facility costs due to the new office facility leased in March 2015.Interest ExpenseInterest expense of $0.4 million for the year ended December 31, 2015 consists of interest and amortization of the debt discount related to the Notesoutstanding. We did not have any debt obligations during the year ended December 31, 2014.81 Sources of LiquidityOn March 22, 2016, we completed the Merger with Celladon, which provided $28.0 million in cash, and issued common stock in a Private Placement, whichprovided $32.1 million in cash, net of issuance costs. Prior to that time, our operations had been financed primarily by net proceeds from the sale ofconvertible preferred stock and the issuance of warrants and convertible promissory notes.In June 2016, we filed a shelf registration statement on Form S-3 (File No. 333-212114) with the Securities and Exchange Commission which permits theoffering, issuance and sale by us of up to a maximum aggregate offering price of $125.0 million of our common stock, preferred stock, debt securities andwarrants. Up to a maximum of $25.0 million of the maximum aggregate offering price of $125.0 million may be issued and sold pursuant to an At-The-Market, or ATM, financing facility under a sales agreement with Cantor Fitzgerald &Co. On August 23, 2016, we completed an underwritten public offeringof 1,250,000 shares of common stock at an offering price of $16.00 for gross cash proceeds of $20.0 million under our shelf registration statement. As a resultof the sale, our aggregate offering price was reduced to $105.0 million.In December 2016, we entered into a secured loan agreement with Oxford Finance LLC, pursuant to which we borrowed $15.0 million and will be permittedto borrow up to an additional $10.0 million upon achievement of positive top line data from the lonafarnib Phase 2 trials in HDV and positive top line Phase2 data from at least one of the following programs, including: (i) Lambda in HDV, (ii) exendin 9-39 in PBH based on the Company’s own IND, (iii) ubenimexin PAH, or (iv) ubenimex in Lymphedema.As of December 31, 2016, we had $27.8 million of cash and cash equivalents, $32.2 million of short-term marketable securities and an accumulated deficit of$76.4 million. We believe that the currently available resources will be sufficient to fund our operations for at least the next 12 months following theissuance date of these consolidated financial statements.Our primary uses of cash are to fund operating expenses, including research and development expenditures and general and administrative expenditures.Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in outstanding accounts payableand accrued expenses.Future Funding RequirementsWe have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We do not expect togenerate any revenue from product sales unless and until we obtain regulatory approval for and commercialize any of our product candidates. At the sametime, we expect our expenses to increase in connection with our ongoing development and manufacturing activities, particularly as we continue the research,development, manufacture and clinical trials of, and seek regulatory approval for, our product candidates.Our primary uses of capital are, and we expect will continue to be, funding research efforts and the development of our product candidates, compensation andrelated expenses, hiring additional staff, including clinical, scientific, operational, financial, and management personnel, and costs associated with operatingas a public company. We expect to incur substantial expenditures in the foreseeable future for the development and potential commercialization of ourproduct candidates.We plan to continue to fund losses from operations and capital funding needs through future equity and/or debt financings, as well as potential additionalcollaborations or strategic partnerships with other companies. The sale of additional equity or convertible debt could result in additional dilution to ourstockholders. The incurrence of indebtedness would result in debt service obligations and could result in operating and financing covenants that wouldrestrict our operations. We can provide no assurance that financing will be available in the amounts we need or on terms acceptable to us, if at all. If we arenot able to secure adequate additional funding we may be forced to delay, make reductions in spending, extend payment terms with suppliers, liquidateassets where possible, and/or suspend or curtail planned programs. Any of these actions could materially harm our business.82 Cash FlowsThe following table summarizes our cash flows for the periods indicated (in thousands): Years Ended December 31, 2016 2015 2014 Net cash provided by (used in): Operating activities $(37,970) $(9,134) $(1,280)Investing activities (4,194) (45) (3)Financing activities 65,142 13,180 1,915 Net increase in cash and cash equivalents $22,978 $4,001 $632Cash flows from operating activitiesCash used in operating activities for the year ended December 31, 2016, was $38.0 million, primarily consisted of a net loss of $47.1 million, offset by $3.2million expense related to a non-cash issuance of common stock to Bristol-Meyers Squibb in connection with the BMS License Agreement, $3.2 million ofstock-based compensation expense, $0.7 million of non-cash interest expense related to the Notes outstanding prior to their conversion into common stock inMarch 2016 and $0.4 million change in fair value of warrant liability and obligation to issue shares to Eiccose. Additionally, cash used in operatingactivities reflected changes in net operating assets primarily due to an increase of $1.5 million in accounts payable and accrued expenses and other liabilitiesprimarily associated with increase in business activity, and decrease of $0.3 million in prepaid expenses and other current assets.Cash used in operating activities for the year ended December 31, 2015 was $9.1 million, primarily consisted of a net loss of $13.3 million, offset by $1.5million change in fair value of obligation to issue shares to Eiccose, $0.4 million of non-cash interest expense related to the Notes, $0.2 million expenserelated to a non-cash issuance of common stock to Dr. Tracey McLaughlin and Dr. Colleen Craig in connection with the acquisition of assets related to thecompound exendin 9-39 and $0.2 million of stock-based compensation expense. Additionally, cash used in operating activities reflected changes in netoperating assets primarily due to an increase of $2.7 million in accounts payable and accrued expenses and other liabilities primarily associated with increasein business activity, offset by a $0.7 million increase in prepaid expenses and other current assets primarily associated with the prepayment of a licenseagreement.Cash used in operating activities for the year ended December 31, 2014 was $1.3 million and primarily consisted of a net loss of $1.5 million, offset by a $0.2million increase in accrued expenses and other liabilities primarily associated with increase in research and development activities.Cash flows from investing activitiesNet cash used in investing activities of $4.2 million for the year ended December 31, 2016, and primarily consisted of a $34.2 million purchase of marketablesecurities, offset by $28.0 million of proceeds received upon the consummation of the Merger and $2.0 million proceeds from maturities of marketablesecurities.Cash used in investing activities for the year ended December 31, 2015 and 2014 was related to the purchase of property and equipment.Cash flows from financing activitiesCash provided by financing activities for the year ended December 31, 2016, primarily consisted of $32.1 million of proceeds from the issuance of commonstock in the Private Placement on March 22, 2016, net of issuance costs, net proceeds of $18.2 million from the issuance of common stock in theunderwritten public offering, after deducting underwriting discounts and commissions and expenses payable by us, and proceeds of $14.8 million fromborrowings in connection with Oxford loan, net of issuance costs.83 Cash provided by financing activities for the year ended December 31, 2015 consisted of $7.2 million of proceeds from the issuance of convertible preferredstock, net of issuance costs and $6.0 million of proceeds from issuance of the Notes, net of issuance costs.Cash provided by financing activities for the year ended December 31, 2014 consisted of $1.9 million of proceeds from the issuance of convertible preferredstock, net of issuance costs.Contractual Obligations and CommitmentsThe following table summarizes our contractual obligations at December 31, 2016 (in thousands): Payments due by period Total Lessthan1 year 1 – 3Years 3 – 5Years Morethan5 years Operating lease obligations (1) $401 $330 $71 $— $— Term loan debt (2) $15,000 $— $12,083 $2,917 $— Interest on term loan debt (3) $4,378 $979 $2,205 $1,194 $— Total $19,779 $1,309 $14,359 $4,111 $— (1)Represents future rent payments under two Palo Alto facility lease contracts.(2)Represents the Oxford first tranche Loan of $15.0 million.(3)Includes an exit fee on the Oxford Loan of $1.125 million due at maturity.We are obligated to make future payments to third parties under asset purchase and license agreements, including royalties and payments that become dueand payable on the achievement of certain development and commercialization milestones. We have not included these potential payment obligations in thetable above as the amount and timing of such payments are not known.Oxford Finance Term LoanOn December 30 2016, we entered into the Oxford Loan for $25.0 million. The Oxford Loan bears interest at a floating rate per annum equal to the greater ofeither the 30-day U.S. Dollar LIBOR reported in the Wall Street Journal plus 6.41% or 6.95%, with interest only payments through July 1, 2018 followed by36 equal monthly payments of principal and interest until maturity at July 1, 2021. At the time of final payment, we are required to pay an exit fee of 7.5% ofthe original principal balance of the Oxford Loan, which was $1.125 million at December 31, 2016. The loan is secured by the perfected first priority liens onour assets, including our commitment to not allow any liens to be placed upon our intellectual property. The Oxford Loan includes customary events ofdefault, including failure to pay amounts due, breaches of covenants and warranties, material adverse effect events, certain cross defaults and judgments, andinsolvency. As of December 31, 2016, we were in compliance with all loan terms.Off-Balance Sheet ArrangementsDuring the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under the rules of the SEC and do nothave any holdings in variable interest entities.Recent Accounting PronouncementsIn August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40) – Disclosure of Uncertaintiesabout an Entity’s Ability to Continue as a Going Concern (ASU 2014-15), which requires the Company’s management to evaluate whether there issubstantial doubt about the Company’s ability to continue as a going concern. The pronouncement is effective for the annual period ending after December15, 2016, and for annual periods and interim periods thereafter. Early adoption is permitted. The Company adopted ASU 2014-15 during its fiscal year endedDecember 31, 2016, which did not have a material effect on the Company’s consolidated financial statements and related disclosures.84 In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. ASU No. 2016-01 supersedes and amends the guidance to classify equity securities with readily determinable fair values into different categories (that is, trading oravailable-for-sale) and require equity securities to be measured at fair value with changes in the fair value recognized through net income. The amendmentsallow equity investments that do not have readily determinable fair values to be remeasured at fair value either upon the occurrence of an observable pricechange or upon identification of an impairment. The amendments also require enhanced disclosures about those investments. ASU No. 2016-01 is effectivefor annual reporting beginning after December 15, 2017, including interim periods within the year of adoption, and calls for prospective application. TheCompany is currently in the process of evaluating the impact that the standard will have on its consolidated financial statements.In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize most leases on their balance sheet. The standardrequires use of the modified retrospective transition method, with elective relief, which requires application of the guidance for all periods presented. Thenew standard will be effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company is currently in the process ofevaluating the impact that the standard will have on its consolidated financial statements.In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based PaymentAccounting, which is intended to simplify several aspects of the accounting for employee share-based payment transactions, including the accounting andreporting of income taxes, the determination of forfeiture rates, classification of awards as either equity or liabilities, and classification on the statement ofcash flows. ASU 2016-09 is effective for fiscal years and interim periods within those years beginning after December 15, 2016 and early adoption ispermitted. The Company does not anticipate the adoption of ASU 2016-09 will have a material impact of its consolidated financial statements and relateddisclosures.In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The standard changes how entities will measure creditlosses for most financial assets and certain other instruments that are not measured at fair value through net income. Financial assets measured at amortizedcost will be presented at the net amount expected to be collected by using an allowance for credit losses. The standard is effective for fiscal years and interimperiods beginning after December 15, 2019. Early adoption is permitted for all periods beginning after December 15, 2018. The Company is currently in theprocess of evaluating the impact that the standard will have on its consolidated financial statements.In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and CashPayments. ASU 2016-15 identifies how certain cash receipts and cash payments are presented and classified in the Statement of Cash Flows. The standard iseffective for fiscal years and interim periods beginning after December 15, 2017. The standard should be applied retrospectively and early adoption ispermitted, including adoption in an interim period. The Company is currently in the process of evaluating the impact that the standard will have on itsconsolidated financial statements. ITEM 7A. Quantitative and Qualitative Disclosures About Market RiskWe are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information underthis item. 85 ITEM 8. Financial Statements and Supplementary DataReport of Independent Registered Public Accounting FirmThe Board of Directors and Stockholders ofEiger BioPharmaceuticals, Inc.We have audited the accompanying consolidated balance sheets of Eiger BioPharmaceuticals, Inc. and subsidiaries (the Company), as of December 31, 2016and 2015, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the years in thethree-year period ended December 31, 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibilityis to express an opinion on these consolidated financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of EigerBioPharmaceuticals, Inc. and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the years inthe three-year period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles. /s/ KPMG LLPSan Francisco, CAMarch 22, 2017 86 Eiger BioPharmaceuticals, Inc.Consolidated Balance Sheets(In thousands, except share and per share amounts) December 31, 2016 2015 Assets Current assets: Cash and cash equivalents $27,756 $4,778 Short-term marketable securities 32,180 — Prepaid expenses and other current assets 581 717 Total current assets 60,517 5,495 Property and equipment, net 76 41 Other assets 143 46 Total assets $60,736 $5,582 Liabilities and Stockholders’ Equity (Deficit) Current liabilities: Accounts payable $2,639 $1,940 Accrued liabilities 2,649 1,006 Convertible promissory note — 5,444 Total current liabilities 5,288 8,390 Long term debt, net 14,727 — Warrant liability — 885 Obligation to issue common stock — 1,457 Other long term liabilities — 2 Total liabilities $20,015 $10,734 Commitments and contingencies Stockholders’ equity (deficit): Convertible preferred stock, $0.0001 par value: 0 and 2,694,579 shares authorized as of December 31, 2016 and 2015, respectively; 0 and 2,609,102 shares issued and outstanding as of December 31, 2016 and 2015, respectively; liquidation preference of $0 and $22,269 as of December 31, 2016 and 2015, respectively — 22,567 Preferred stock, $0.0001 par value: 10,000,000 and 0 shares authorized as of December 31, 2016 and 2015, respectively; 0 shares issued and outstanding as of December 31, 2016 and 2015, respectively — — Common stock, $0.0001 par value, 200,000,000 and 5,951,487 shares authorized as of December 31, 2016 and 2015, respectively; 8,356,659 and 273,993 shares issued and outstanding as of December 31, 2016 and 2015, respectively 8 — Additional paid-in capital 117,086 1,552 Accumulated other comprehensive loss (15) — Accumulated deficit (76,358) (29,271)Total stockholders’ equity (deficit) 40,721 (5,152)Total liabilities and stockholders’ equity (deficit) $60,736 $5,582 See accompanying notes to the consolidated financial statements. 87 Eiger BioPharmaceuticals, Inc.Consolidated Statements of Operations(In thousands, except share and per share amounts) Year Ended December 31, 2016 2015 2014 Operating expenses: Research and development $33,014 $8,117 $644 General and administrative 13,106 4,855 872 Total operating expenses 46,120 12,972 1,516 Loss from operations (46,120) (12,972) (1,516)Interest expense (690) (350) — Other expense, net (277) — — Net loss $(47,087) $(13,322) $(1,516)Net loss per share, basic and diluted $(7.84) $(62.19) $(7.82)Weighted-average common shares outstanding, basic and diluted 6,007,027 214,228 193,850 See accompanying notes to the consolidated financial statements. 88 Eiger BioPharmaceuticals, Inc.Consolidated Statements of Comprehensive Loss(In thousands) Year Ended December 31, 2016 2015 2014 Net loss $(47,087) $(13,322) $(1,516)Other comprehensive loss: Unrealized loss on marketable securities, net (15) — — Comprehensive loss $(47,102) $(13,322) $(1,516) See accompanying notes to the consolidated financial statements. 89 Eiger BioPharmaceuticals, Inc.Consolidated Statements of Stockholders’ Equity (Deficit)(In thousands, except share amounts) ConvertiblePreferred Stock Common Stock AdditionalPaid-In Accumulated OtherComprehensive Accumulated TotalStockholders’ Shares Amount Shares Amount Capital Loss Deficit Equity (Deficit) Balance at December 31,2013 1,228,418 $13,451 193,850 $— $1,087 $— $(14,433) $105 Issuance of Series A-1 convertible preferredstock, net of $13 of issuance costs 290,856 1,915 — — — — — 1,915 Stock-based compensation expense — — — — 27 — — 27 Net loss — — — — — — (1,516) (1,516)Balance at December 31,2014 1,519,274 15,366 193,850 — 1,114 — (15,949) 531 Issuance of Series A-1 convertible preferredstock, net of $22 of issuance costs 1,089,828 7,201 — — — — — 7,201 Issuance of common stockin connection with a licenseand asset purchase agreement — — 15,378 — 211 — — 211 Issuance of common stockupon stock option exercises — — 64,765 — — — — — Stock-based compensation expense — — — — 227 — — 227 Net loss — — — — — — (13,322) (13,322)Balance at December 31,2015 2,609,102 22,567 273,993 — 1,552 — (29,271) (5,152)Issuance of common stockupon private placement, net of $1,300 of issuance cost — — 1,954,390 2 32,106 — — 32,108 Issuance of common stockupon conversion ofconvertible promissory note — — 350,040 — 6,129 — — 6,129 Issuance of common stockupon exercise of warrants — — 61,254 — 1,057 — — 1,057 Issuance of common stockto Eiccose upon private placement — — 96,300 — 1,661 — — 1,661 Conversion of preferred stock into common stock (2,609,102) (22,567) 2,609,102 3 22,564 — — — Issuance of common stockupon reverse merger — — 1,596,959 2 27,388 — — 27,390 Issuance of common stockupon execution of license agreement — — 157,587 — 3,172 — — 3,172 Issuance of common stockupon public offering, net of$1,800 of issuance costs — — 1,250,000 1 18,228 — — 18,229 Issuance of common stockupon exercise of stock option — — 7,034 — 39 — — 39 Stock-based compensation expense — — — — 3,190 — — 3,190 Unrealized loss onmarketable securities, net — — — — — (15) — (15)Net loss — — — — — — (47,087) (47,087)Balance at December 31,2016 — $— 8,356,659 $8 $117,086 $(15) $(76,358) $40,721 See accompanying notes to the consolidated financial statements. 90 Eiger BioPharmaceuticals, Inc.Consolidated Statements of Cash Flows(In thousands) Year Ended December 31, 2016 2015 2014 Operating Activities Net loss $(47,087) $(13,322) $(1,516)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 23 11 8 Amortization of premiums on marketable securities (41) — — Stock-based compensation 3,190 227 27 Noncash interest expense 685 350 — Issuance of common stock in connection with a license and asset purchase agreement 3,172 211 — Change in fair value of obligation to issue shares to Eiccose 204 1,457 — Change in fair value of warrants liability 165 — — Changes in operating assets and liabilities: Prepaid expenses and other current assets 326 (685) (14)Other non-current assets (89) (46) — Accounts payable 699 1,881 40 Accrued and other liabilities 783 782 175 Net cash used in operating activities (37,970) (9,134) (1,280)Investing Activities Purchase of marketable securities (34,154) — — Proceeds from maturities of marketable securities 2,000 — — Cash received from merger transaction 28,018 — — Purchase of property and equipment (58) (45) (3)Net cash used in investing activities (4,194) (45) (3)Financing Activities Proceeds from borrowings in connection with term loan, net of issuance cost 14,759 — — Proceeds from issuance of common stock upon private placement, net of issuance cost 32,108 — — Proceeds from issuance of common stock upon public offering, net of issuance cost 18,229 — — Proceeds from issuance of common stock upon options exercises 39 — — Proceeds from issuance of common stock upon warrants exercises 7 — — Proceeds from issuance of convertible promissory note, net of issuance costs — 5,979 — Proceeds from issuance of preferred stock, net of issuance costs — 7,201 1,915 Net cash provided by financing activities 65,142 13,180 1,915 Net increase in cash and cash equivalents 22,978 4,001 632 Cash and cash equivalents at beginning of period 4,778 777 145 Cash and cash equivalents at end of period $27,756 $4,778 $777 Supplemental disclosure of cash flow information Noncash investing and financing activities: Conversion of warrant liability to common stock upon private placement $1,050 $— $— Issuance of common stock in connection with a license agreement 3,172 211 — Issuance of common stock to Eiccose upon private placement 1,661 — — Noncash net liabilities assumed in reverse merger 671 — — Conversion of convertible promissory note to common stock upon private placement 6,129 — — Conversion of preferred stock to common stock upon reverse merger 22,567 — — Issuance of warrants in connection with convertible promissory note — 885 — See accompanying notes to the consolidated financial statements. 91 Eiger Biopharmaceuticals, Inc.Notes to Consolidated Financial Statements 1.Description of BusinessEiger BioPharmaceuticals, Inc. (the “Company”) was incorporated in the State of Delaware on November 6, 2008. The Company is a clinical-stagebiopharmaceutical company committed to bringing to market novel products for the treatment of orphan diseases. The Company has built a diverse portfolioof well-characterized product candidates with the potential to address diseases for which the unmet medical need is high, the biology for treatment is clear,and for which an effective therapy is urgently needed. The Company’s principal operations are based in Palo Alto, California and it operates in one segment.Reverse MergerOn March 22, 2016, Eiger BioPharmaceuticals, Inc. (“Eiger”) completed its merger with Celladon Corporation (“Celladon”) in accordance with the terms ofthe Agreement and Plan of Merger and Reorganization, dated November 18, 2015 (the “Merger Agreement”), by and among Celladon, Celladon Merger Sub,Inc. (“Merger Sub”) and Eiger (the “Merger”). Pursuant to the Merger Agreement, Merger Sub merged with and into Eiger, with Eiger becoming a wholly-owned subsidiary of Celladon and the surviving corporation of the Merger. Pursuant to the terms and subject to the conditions set forth in the MergerAgreement, Eiger stockholders became the majority stockholders of the surviving company. In connection with, and immediately prior to, the closing of theMerger, on March 22, 2016, Celladon filed an amendment to its amended and restated certificate of incorporation with the Secretary of State of the State ofDelaware to affect a fifteen-for-one reverse stock split of its common stock (the “Reverse Stock Split”). In connection with and immediately following theconsummation of the Merger, on March 22, 2016, Celladon filed an amendment to its amended and restated certificate of incorporation with the Secretary ofState of the State of Delaware to change its name to Eiger BioPharmaceuticals, Inc. The Company’s shares of common stock listed on the NASDAQ GlobalMarket, previously trading through the close of business on Tuesday, March 22, 2016 under the ticker symbol “CLDN,” commenced trading on the NASDAQGlobal Market, on a post-reverse stock split adjusted basis, under the ticker symbol “EIGR” on March 23, 2016. On March 22, 2016, a Certificate of Mergerwas filed with the Secretary of State of the State of Delaware to affect the Merger of Merger Sub with and into Eiger. See Note 5 for further details.The Company, or Eiger, as used in the accompanying notes to the consolidated financial statements, refers to Private Eiger prior to the completion of theMerger and Public Eiger subsequent to the completion of the Merger.Reverse Stock Split and Exchange RatioOn March 22, 2016, and prior to the closing of the Merger, Celladon completed a fifteen-for-one reverse stock split. As a result of the reverse stock split,every fifteen shares of Celladon common stock outstanding immediately prior to the Merger were combined and reclassified into one share of Celladoncommon stock. No fractional shares were issued in connection with the reverse stock split.The holders of shares of Eiger common stock outstanding immediately prior to the Merger received approximately 0.09 shares of Celladon common stock inexchange for each share of Eiger common stock in the Merger. Following the reverse stock split and the Merger on March 22, 2016, the combined companyhad 6,945,401 shares of common stock outstanding.The accompanying consolidated financial statements and notes to the consolidated financial statements give retroactive effect to the reverse stock split forall periods presented.LiquidityAs of December 31, 2016, the Company had $27.8 million of cash and cash equivalents, $32.2 million of short-term marketable securities, an accumulateddeficit of $76.4 million and negative cash flows from operating activities. The Company expects to continue to incur losses for the next several years.92 Management believes that the currently available resources will be sufficient to fund its operations for at least the next 12 months following the issuance dateof these consolidated financial statements. However, if the Company’s anticipated operating results are not achieved in future periods, management believesthat planned expenditures may need to be reduced in order to extend the time period over which the then-available resources would be able to fund theCompany’s operations. 2.Summary of Significant Accounting PoliciesBasis of Presentation and ConsolidationThe consolidated financial statements include the accounts of Eiger BioPharmaceuticals, Inc. and its wholly owned subsidiaries, EB Pharma LLC and EigerBioPharmaceuticals Europe Limited, and have been prepared in conformity with accounting principles generally accepted in the United States of America,(“U.S. GAAP”). All intercompany balances and transactions have been eliminated in consolidation.Use of EstimatesThe preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts ofexpenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to clinical trial accrued liabilities,stock-based compensation and income taxes. The Company bases its estimates on historical experience and on various other market-specific and relevantassumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.Concentrations of RiskFinancial instruments that potentially subject the Company to a concentration of credit risk consists of cash, cash equivalents and investments. TheCompany’s cash is held by a financial institution in the United States. Amounts on deposit may at times exceed federally insured limits. Managementbelieves that the financial institution is financially sound, and accordingly, minimal credit risk exists with respect to the financial institution.For each product candidate, the Company relies on one supply chain for each of the four product candidates. If any of the single source suppliers in any of thesupply chains fail to satisfy the Company’s requirements on a timely basis, it could suffer delays in its clinical development programs and activities, whichcould adversely affect its operating results.Cash and Cash EquivalentsCash and cash equivalents include all cash balances and highly liquid investments with original maturities of three months or less from the date of purchase.Cash equivalents consists primarily of amounts invested in money market funds held at financial institutions and corporate debt securities. The recordedcarrying amount of cash equivalents approximates their fair value. InvestmentsShort-term investments consist of debt securities classified as available-for-sale and have maturities greater than 90 days, but less than 365 days from the dateof acquisition. All investments are carried at fair value based upon quoted market prices. Unrealized gains and losses on available-for-sale securities areexcluded from earnings and are reported as a component of accumulated other comprehensive loss. The cost of available-for-sale securities sold is based onthe specific-identification method. Realized gains and losses on the sale of marketable securities are determined using the specific-identification method andrecorded in other expense, net on the accompanying consolidated statements of operations.93 Property and EquipmentProperty and equipment are stated at cost, less accumulated depreciation. Depreciation expense is computed using the straight-line method over theestimated useful lives of the assets. Depreciation begins at the time the asset is placed into service. Maintenance and repairs are charged to operations asincurred. Property and equipment purchased for specific research and development projects with no alternative uses are expensed as incurred.The useful lives of the property and equipment are as follows: Lab equipment 5 yearsComputer equipment and software 3 yearsImpairment of Long-Lived AssetsThe Company evaluates its long-lived assets, including property and equipment, for impairment whenever events or changes in circumstances indicate thatthe carrying value of these assets may not be recoverable. The Company assesses the recoverability of long-lived assets by determining whether or not thecarrying value of such assets will be recovered through undiscounted expected future cash flows. If the asset is considered to be impaired, the amount of anyimpairment is measured as the difference between the carrying value and the fair value of the impaired asset. Through December 31, 2016, the Company hasnot impaired any long-lived assets.Accrued Research and Development CostsThe Company accrues for estimated costs of research and development activities conducted by third-party service providers, which include the conduct ofpreclinical and clinical studies, and contract manufacturing activities. The Company records the estimated costs of research and development activities basedupon the estimated amount of services provided but not yet invoiced, and includes these costs in accrued liabilities in the consolidated balance sheets andwithin research and development expense in the consolidated statements of operations. The Company accrues for these costs based on factors such asestimates of the work completed and in accordance with agreements established with its third-party service providers. The Company makes judgments andestimates in determining the accrued liabilities balance in each reporting period. As actual costs become known, the Company adjusts its accrued liabilities. Deferred Financing CostsFinancing costs incurred with securing a term debt are recorded in the Company’s consolidated balance sheets as an offset to the term debt and amortized tointerest expense in the Company’s consolidated statements of operations over the contractual life of the loan using the effective interest method.Warrant LiabilityThe Company issued warrants to purchase equity securities of the Company (the “Warrants”) in connection with the issuance of a convertible promissorynotes (the “Notes”) (see Note 9). The Company accounted for the Warrants as a liability at fair value as the number of shares were not fixed and determinableat the issuance date. The Company continued to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the Warrants, oruntil the number of shares to be exercised became fixed, in which case the Warrants were classified in stockholders’ equity (deficit) as there were sufficientauthorized and unissued shares of common stock to settle the Warrants and redeem any other contracts that may require settlement in shares of commonstock. The change in fair value of the warrant liability was recognized as a component of other expense, net in the consolidated statements of operations. Thewarrant liability was settled in March 2016 (see Note 9), and thus is no longer subject to remeasurement.94 Research and Development CostsResearch and development costs are expensed as incurred and consist of payroll expenses, stock-based compensation expense, lab supplies and allocatedfacility costs, as well as fees paid to third parties that conduct certain research and development activities on the Company’s behalf. Amounts incurred inconnection with license and asset purchase agreements are also included in research and development expense.Stock-Based CompensationStock-based awards to employees and directors, including stock options, are recorded at fair value as of the grant date using the Black-Scholes option pricingmodel and recognized as expense on a straight line-basis over the employee’s or director’s requisite service period (generally the vesting period). Non-cashstock compensation expense is based on awards ultimately expected to vest and is reduced by an estimate for future forfeitures. Forfeitures are estimated atthe time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from estimates. The determination of fair value for stock-basedawards on the date of grant using an option pricing model requires management to make certain assumptions regarding subjective variables.Stock-based awards and stock options issued to non-employee consultants are recorded at fair value and remeasured at the end of each period as they vestusing the Black-Scholes option pricing model. Expense is recognized over the vesting period which is generally the same as the service period.Income TaxesThe Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined basedon the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will bein effect when the differences are expected to reverse. The Company must then assess the likelihood that the resulting deferred tax assets will be realized. Avaluation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. Due to the Company’s lackof earnings history, the net deferred tax assets have been fully offset by a valuation allowance.The Company recognizes benefits of uncertain tax positions if it is more likely than not that such positions will be sustained upon examination based solelyon their technical merits, as the largest amount of benefit that is more likely than not to be realized upon the ultimate settlement. The Company’s policy is torecognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit. To date, there have been nointerest or penalties charged in relation to unrecognized tax benefits.Internal Revenue Code Section 382 limits the use of net operating loss and tax credit carryforwards in certain situations where changes occur in the stockownership of a company. In the event that the Company had a change of ownership, utilization of the net operating loss and tax credit carryforwards may berestricted. The Company has performed an Internal Revenue Code Section 382 limitation study as of December 31, 2016 (see Note 12).Comprehensive LossComprehensive loss represents all changes in stockholders' equity (deficit) except those resulting from and distributions to stockholders. The Company’sunrealized gains and losses on available-for-sale securities represent the only component of other comprehensive loss that are excluded from the reported netloss and that are presented in the consolidated statements of comprehensive loss.Net Loss per ShareBasic net loss per share of common stock is calculated by dividing the net loss by the weighted average number of shares of common stock outstandingduring the period, without consideration for potentially dilutive securities. Since the Company was in a loss position for all periods presented, diluted netloss per share is the same as basic net loss per share for all periods as the inclusion of all potential common shares outstanding would have been anti-dilutive.95 The following table sets forth the outstanding potentially dilutive securities which have been excluded in the calculation of diluted net loss per sharebecause including such securities would be anti-dilutive (in common stock equivalent shares): December 31, 2016 2015 2014 Options to purchase common stock 1,212,044 254,058 105,898 Warrants to purchase common stock 10,180 — — Convertible preferred stock — 2,609,102 1,519,274 Total 1,222,224 2,863,160 1,625,172Common stock issued in connection with the asset purchase agreements (see Note 7) and the note and warrants purchase agreement (see Note 9) wereexcluded from the total outstanding potentially dilutive securities as of December 31, 2015, as the amounts of common stock to be issued were notdeterminable as of December 31, 2015.Recent Accounting PronouncementsIn August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40) – Disclosure of Uncertaintiesabout an Entity’s Ability to Continue as a Going Concern (ASU 2014-15), which requires the Company’s management to evaluate whether there issubstantial doubt about the Company’s ability to continue as a going concern. The pronouncement is effective for the annual period ending after December15, 2016, and for annual periods and interim periods thereafter. Early adoption is permitted. The Company adopted ASU 2014-15 during its fiscal year endedDecember 31, 2016, which did not have a material effect on the Company’s consolidated financial statements and related disclosures.In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. ASU No. 2016-01 supersedes and amends the guidance to classify equity securities with readily determinable fair values into different categories (that is, trading oravailable-for-sale) and require equity securities to be measured at fair value with changes in the fair value recognized through net income. The amendmentsallow equity investments that do not have readily determinable fair values to be remeasured at fair value either upon the occurrence of an observable pricechange or upon identification of an impairment. The amendments also require enhanced disclosures about those investments. ASU No. 2016-01 is effectivefor annual reporting beginning after December 15, 2017, including interim periods within the year of adoption, and calls for prospective application. TheCompany is currently in the process of evaluating the impact that the standard will have on its consolidated financial statements.In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize most leases on their balance sheet. The standardrequires use of the modified retrospective transition method, with elective relief, which requires application of the guidance for all periods presented. Thenew standard will be effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company is currently in the process ofevaluating the impact that the standard will have on its consolidated financial statements.In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based PaymentAccounting, which is intended to simplify several aspects of the accounting for employee share-based payment transactions, including the accounting andreporting of income taxes, the determination of forfeiture rates, classification of awards as either equity or liabilities, and classification on the statement ofcash flows. ASU 2016-09 is effective for fiscal years and interim periods within those years beginning after December 15, 2016 and early adoption ispermitted. The Company does not anticipate the adoption of ASU 2016-09 will have a material impact of its consolidated financial statements and relateddisclosures.In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The standard changes how entities will measure creditlosses for most financial assets and certain other instruments that are not measured at fair value through net income. Financial assets measured at amortizedcost will be presented at the net amount expected to be collected by using an allowance for credit losses. The standard is effective for fiscal years and interimperiods beginning after December 15, 2019. Early adoption is permitted for all periods beginning after December 15, 2018. The Company is currently in theprocess of evaluating the impact that the standard will have on its consolidated financial statements.96 In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and CashPayments. ASU 2016-15 identifies how certain cash receipts and cash payments are presented and classified in the Statement of Cash Flows. The standard iseffective for fiscal years and interim periods beginning after December 15, 2017. The standard should be applied retrospectively and early adoption ispermitted, including adoption in an interim period. The Company is currently in the process of evaluating the impact that the standard will have on itsconsolidated financial statements. 3.Fair Value MeasurementsFair value accounting is applied for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurringbasis (at least annually). At December 31, 2016 and 2015 the carrying amount of prepaid expenses, accounts payable and accrued liabilities approximatedtheir estimate fair value due to their relatively short maturities. Management believes the terms of the Notes and long term debt reflect current marketconditions for an instrument with similar terms and maturity, therefore the carrying value of the Company’s debt approximated its fair value.Assets and liabilities recorded at fair value on a recurring basis in the consolidated balance sheets are categorized based upon the level of judgmentassociated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price thatwould be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between marketparticipants on the measurement date. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fairvalue measurements as follows:Level 1: Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;Level 2: Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical orsimilar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data forsubstantially the full term of the related assets or liabilities; andLevel 3: Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or nomarket data.The Company’s money market funds are classified as Level 1 because they are valued using quoted market prices. The Company’s marketable securitiesconsist of available-for-sale securities and are classified as Level 2 because their value is based on valuations using significant inputs derived from orcorroborated by observable market data. The Company’s financial instruments as of December 31, 2015 included a warrant liability and an obligation toissue common stock in connection with the asset purchase agreement with Eiccose, LLC (“Eiccose”) (see Note 7), which were classified as Level 3. As of December 31, 2015, in order to determine the fair value of the Company’s warrant liability and the obligation to issue common stock in connectionwith the Eiccose asset purchase agreement, the Company engaged an independent third-party valuation expert to determine the fair value of theseinstruments based on the common stock value which is based on probability weighted scenarios, each based on an income approach. The income approachestimates enterprise value based on the expectation of future cash flows that the Company will generate over the forecast horizon and a terminal value at theend of the forecast horizon. These future cash flows and terminal value are discounted to their present values using a discount rate based upon the requiredrate of return based on the risks associated with the investment. Upon settlement in March 2016, the Company remeasured the fair value of the Company’swarrant liability and the obligation to issue common stock in connection with the Eiccose asset purchase agreement based on the fair value of the commonstock that was issued upon settlement of these instruments.There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the periods presented.97 The following tables present the fair value hierarchy for assets and liabilities measured at fair value (in thousands): December 31, 2016 Level 1 Level 2 Level 3 Total Financial Assets: Money market funds $9,657 $— $— $9,657 Corporate debt securities — 11,469 — 11,469 Commercial paper — 22,891 — 22,891 Total $9,657 $34,360 $— $44,017 December 31, 2015 Level 1 Level 2 Level 3 Total Financial liabilities: Warrant liability $— $— $885 $885 Obligation to issue common stock — — 1,457 1,457 Total $— $— $2,342 $2,342 There were no financial liabilities as of December 31, 2016. There were no financial assets as of December 31, 2015. The following table provides a reconciliation of liabilities measured at fair value using Level 3 significant unobservable inputs (in thousands): Year Ended December 31, 2016 2015 Balance, beginning of period $2,342 $— Issuance of common stock warrants — 885 Initial recognition of obligation to issue common stock to Eiccose — 1,457 Change in fair value of common stock warrants and obligation to issue common stock to Eiccose (1) 369 — Settlement of warrant liability upon exercise of common stock warrants (1,050) — Settlement of Eiccose obligation upon issuance of common stock (1,661) — Balance, end of period $— $2,342 (1)Changes in fair value of the obligation to issue common stock and the common stock warrant liability are recorded in other expense, net on theaccompanying consolidated statements of operations.The following table summarizes the estimated value of the Company’s cash equivalents and marketable securities and the gross unrealized holding gains andlosses (in thousands): December 31, 2016 Amortized cost Unrealized gain Unrealized loss Estimated Fair Value Cash equivalents: Money market funds 9,657 — — 9,657 Corporate debt securities 2,180 — — 2,180 Total cash equivalents $11,837 $— $— $11,837 Marketable securities: Corporate debt securities $9,294 $— $(5) $9,289 Commercial paper 22,901 3 (13) 22,891 Total marketable securities $32,195 $3 $(18) $32,180 As of December 31, 2016, the contractual maturity of the available-for-sale marketable securities is less than one year. There were no cash equivalents andmarketable securities at December 31, 2015.98 4.Balance Sheet ComponentsProperty and Equipment, NetProperty and equipment, net consist of the following (in thousands): December 31, 2016 2015 Lab equipment $35 $35 Computer equipment and software 107 49 Total property and equipment 142 84 Less: accumulated depreciation (66) (43)Property and equipment, net $76 $41 Depreciation expense for the years ended December 31, 2016, 2015 and 2014 was $23,000, $11,000 and $8,000, respectively.Accrued LiabilitiesAccrued liabilities consist of the following (in thousands): December 31, 2016 2015 Compensation and related benefits $1,299 $586 Consulting costs 106 245 Contract research costs 834 152 Franchise tax 97 — Contract manufacturing costs 122 — Other 191 23 Total accrued liabilities $2,649 $1,006 5.Reverse MergerOn March 22, 2016, Eiger completed the Merger with Celladon as discussed in Note 1. For accounting purposes, Eiger is considered to have acquiredCelladon in the Merger. Eiger was determined to be the accounting acquirer based upon the terms of the Merger and other factors including; (i) Eiger securityholders owned approximately 78% of the combined company immediately following the closing of the Merger, (ii) Eiger directors held all of the board seatsin the combined company, and (iii) Eiger management held all key positions in the management of the combined company. The Merger was accounted for asan asset acquisition rather than business combination because the assets acquired and liabilities assumed by Eiger did not meet the definition of a business asdefined by U.S. GAAP. The net assets acquired in connection with this transaction were recorded at their estimated acquisition date fair values as of March22, 2016, the date the Merger with Celladon was completed.Immediately prior to the effective date of the Merger and in connection with the Private Placement, the Notes converted into shares of common stock ofEiger. Further, all of the Warrants were exercised for common stock (see Note 9) and all shares of preferred stock of Eiger converted into shares of commonstock of Eiger.At the effective date of the Merger, Celladon issued shares of its common stock to Eiger stockholders, at an exchange rate of approximately 0.09 shares ofcommon stock, after taking into account the Reverse Stock Split, in exchange for each share of Eiger common stock outstanding immediately prior to theMerger. The exchange rate was calculated by a formula that was determined through arms-length negotiations between Celladon and Eiger. The combinedCompany assumed all of the outstanding options, whether or not vested, under the Eiger 2009 Equity Incentive Plan (the “Eiger Plan”) with such optionshenceforth representing the right to purchase a number of shares of Celladon common stock equal to approximately 0.09 multiplied by the number of sharesof Eiger common stock previously represented by such options.99 Immediately after the Reverse Stock Split and the Merger on March 22, 2016, there were 6,945,401 shares of the combined Company’s common stockoutstanding. In addition, immediately after the Merger, pre-Merger Eiger stockholders, warrant holders and option holders owned approximately 78% of theaggregate number of shares of the combined Company’s common stock, and the stockholders of Celladon immediately prior to the Merger ownedapproximately 22% of the aggregate number of shares of the combined Company’s common stock (on a fully diluted basis).On March 22, 2016, Celladon had 1,596,959 shares of common stock outstanding and a market capitalization of $27.5 million. The estimated fair value ofthe net assets of Celladon on March 22, 2016 was $27.3 million. The fair value of Celladon’s common stock on the Merger closing date was above the fairvalue of Celladon’s net assets. As Celladon’s net assets were predominantly comprised of cash offset by current liabilities, the fair value of Celladon’s netassets as of March 22, 2016 was considered to be the best indicator of the fair value and, therefore, the estimated purchase consideration.The following table summarizes the net assets acquired based on their estimated fair values as of March 22, 2016 (in thousands): Cash and cash equivalents $28,018 Prepaid and other assets 198 Current liabilities (857)Non-current liabilities (12)Net acquired tangible assets 27,347 Estimated total purchase consideration $27,347 6.License AgreementsBristol-Meyers Squibb License AgreementOn April 20, 2016, the Company and Bristol-Myers Squibb Company (“BMS”) entered into a License Agreement (the “BMS License Agreement”) and aCommon Stock Purchase Agreement (the “BMS Purchase Agreement”).Under the BMS License Agreement, BMS granted the Company an exclusive, worldwide, license to research, develop, manufacture, and sell productscontaining the proprietary BMS molecule known as PEG-interferon Lambda-1a (the “Licensed Product”) for all therapeutic and diagnostic uses in humansand animals. The Company is responsible for the development and commercialization of the Licensed Product at its sole cost and expense. The LicenseAgreement requires the Company to make an upfront payment of $2.0 million in cash and issue $3.0 million in Company common stock and includesdevelopment and regulatory milestone payments totaling $61.0 million and commercial sales milestones of up to $128.0 million. The Company is obligatedto pay BMS annual net sales royalties in the range of mid-single to mid-teens, depending on net sales levels. In addition, if the Company grants a sublicense,the Company is obligated to pay BMS a portion of the sublicensing income received.The Company paid BMS an upfront payment of $2.0 million in cash in April 2016, which was charged to research and development expense in theconsolidated statement of operations as there is no future alternative use for the intellectual property licensed.The Company also paid BMS $3.0 million of stock as an element of the upfront payment. The BMS Purchase Agreement provides for the issuance of 157,587shares of common stock of the Company to BMS in consideration of the license granted to the Company under the BMS License Agreement. The BMSPurchase Agreement grants BMS certain registration rights with respect to the shares of common stock delivered, and BMS has agreed to certain trading andother restrictions with respect to the shares issued. In April 2016, the Company issued 157,587 common shares to BMS for an aggregate fair value of $3.2million, which was charged to research and development expense in the consolidated statement of operations as there is no future alternative use for theintellectual property licensed.100 Merck License AgreementIn September 2010, the Company entered into an exclusive license agreement with Schering Corporation, subsequently acquired by Merck & Co., Inc.(“Merck”), which provides the Company with the exclusive right to develop, manufacture, and sell products containing the compounds lonafarnib for thetreatment of all human viruses except certain specified viruses such as hepatitis B and hepatitis C alone. As consideration for such exclusive right, theCompany issued Private Eiger convertible preferred stock with a fair value of $0.5 million when the agreement was executed in September 2010. Thispreferred stock was converted to 27,350 shares of common stock upon the Merger. In addition, the Company is obligated to pay Merck up to an aggregate of$27.0 million in development milestones and will be required to pay tiered royalties based on aggregate annual net sales of all licensed products rangingfrom mid-single to low double-digit royalties on net sales. The Company’s obligation to pay royalties to Merck expires on a country-by-country and product-by-product basis on the later of the expiration of the last to expire patent assigned to the Company under the agreement, which was estimated to be inDecember 2016; or on the tenth anniversary of the first commercial sale of the product. In May 2015, the first regulatory milestone was achieved and theCompany paid the related milestone payment of $1.0 million to Merck. The amount has been recorded as a charge to research and development expenseduring the year ended December 31, 2015. No additional charges were recorded during the year ended December 31, 2016.Janssen License AgreementIn December 2014, the Company entered into a license agreement with Janssen Pharmaceutica NV, (“Janssen”), which provides to the Company with theexclusive worldwide license to develop, manufacture, and sell products containing the compound tipifarnib for all therapeutic and diagnostic uses inhumans, including any such uses for human virology diseases, but excluding oncology diseases. The Company is responsible for the development of at leastone product in a major market country and for commercialization of products in all countries where necessary authorization is obtained, at its sole cost andexpense. The Company may manufacture, develop, and commercialize the products itself or grant one or more sublicenses for such purposes. However, for aperiod of time following completion of the proof of concept trial, Janssen has a first right of negotiation for an exclusive license back from the Company todevelop and commercialize tipifarnib in any country in the world. The agreement will continue for so long as the Company owe royalty payments to Janssenunder the agreement or for so long as there is a valid patent claim under the agreement, whichever is longer.In connection with this license agreement, the Company is obligated to make development milestone payments in aggregate of up to $38.0 million, salesmilestone payments in aggregate up to $65.8 million and will be required to pay tiered royalties based on aggregate annual net sales of all licensed productsranging from mid-single to low double-digit royalties of net sales. As of December 31, 2016, the product has not reached commercialization and nomilestones have been paid. 7.Asset Purchase Agreements and Related License AgreementsEGI Asset Purchase AgreementIn December 2010, the Company entered into an asset purchase agreement with Eiger Group International, Inc. (“EGI”). Dr. Jeffrey Glenn, a founder anddirector of the Company, is the sole owner of EGI. Pursuant to the agreement, the Company purchased all of the assets including the intellectual propertyrights related to the use of farnesyl transferase inhibitors as anti-viral agents and methods to treat viral infections with those inhibitors and inhibitors ofprenylation, prenyl cysteine methyltranferase and a protease as anti-viral agents and methods to treat viral infection with those inhibitors. The Company paidEGI an upfront payment of $0.4 million when the agreement was executed in December 2010. Additionally, the Company will pay EGI a low single-digitroyalty based on aggregate annual net sales of products developed using the intellectual property. Within the first ten years after commercialization, theCompany may make a one-time payment of $0.5 million for each contract for the three types of product related to such intellectual property that wouldreduce the payment term for the three products to the tenth anniversary of the first commercial sale. The obligation to pay royalties expires on a country-by-country and product-by-product basis on the later of either when the product is no longer sold in any country or the earliest of the tenth anniversary of thefirst commercial sale of the product. As of December 31, 2016, the product has not achieved regulatory approval.101 In November 2012, the Company entered into an agreement with EGI whereby the Company sold all of the assets related to the compound clemizole,including any related intellectual property. EGI will pay to the Company a high single-digit royalty on future aggregate annual net sales, subject to certainreductions and exceptions. EGI’s obligation to pay royalties expires on a country-by-country and product-by-product basis on the later of either expiration ofthe last to expire patent sold to EGI under the agreement or the earliest of the tenth anniversary of the first commercial sale of the product. As of December 31,2016, the product has not achieved regulatory approval. Exendin 9-39 Purchase Agreement and Related Stanford License AgreementIn September 2015, the Company entered into an asset purchase agreement with two individuals, Dr. Tracey McLaughlin and Dr. Colleen Craig, (the“Sellers”), whereby the Company purchased all of the assets related to the compound exendin 9-39 including any related intellectual property from theSellers (the “Exendin APA”). The Company also entered into a consulting agreement with the Sellers as part of the agreement. The Company issued 15,378shares of common stock that were valued at $0.2 million and options to purchase 46,134 shares of common stock with an exercise price of $2.06 per sharewhen the agreement was executed in September 2015.Of the 46,134 options to purchase common stock, 15,378 shares vest monthly over four years as services are provided by the Sellers and 30,756 vest upon theearlier of the first commercial sale of the product or the approval of new drug application by the U.S. Food and Drug Administration (the milestone-vestedoptions).On March 22, 2016, immediately following the closing of the Merger, the Company issued additional “top-up” options to Dr. Tracey McLaughlin and Dr.Colleen Craig to purchase an aggregate of 48,544 shares of common stock, pursuant to the terms of the Exendin APA, with an exercise price of $17.25 pershare. The top-up options consist of both time-vested and milestone-vested options.The fair value of the time-vested options is recognized as non-employee share-based compensation expense as the awards vest over time, with the unvestedportion revalued each period. The fair value of the milestone-vested options will be recognized as research and development expense when it is probable thatthe earliest milestone will be achieved at their then fair value. During the years ended December 31, 2016, 2015 and 2014, the Company recognized $0.3million, $15,000 and zero of non-employee compensation expense related to the time-vested options, respectively. No expense was recognized for themilestone vested options during the year ended December 31, 2016, 2015 and 2014.The Company is also obligated to pay development milestone payments in an aggregate amount of up to $1.0 million to each Seller. Additionally, theCompany is obligated to pay each Seller royalties of low single-digits based on aggregate annual net sales of all products developed based on exendin 9-39,subject to certain reductions and exceptions. The Company’s obligation to pay royalties expires on the expiration of the last to expire patent assigned to theCompany under the agreement. Additionally, the Company has assumed the license agreement the Sellers had previously entered into with the Board ofTrustees of the Leland Stanford Junior University (“Stanford”). Prior to the consummation of the Merger, Stanford was a holder of preferred stock of theCompany, which converted into shares of common stock upon the consummation of the Merger and then was sold during the year ended December 31, 2016.The Company is obligated to pay a royalty to Stanford in the low single-digits on annual net sales after the first commercial sale of any products developedbased on exendin 9-39. As of December 31, 2016, the Company had not reached any of the milestone events.Eiccose Purchase Agreement and Related Stanford and Nippon License AgreementsIn October 2015, the Company entered into an asset purchase agreement with Eiccose whereby Eiccose sold all of the assets related to the treatment ofpulmonary arterial hypertension (“PAH”), treatment of lymphedema and products containing ubenimex for the treatment of disorders involving LTB4, andany related intellectual property to the Company (the “Eiccose APA”). David Cory, the President, Chief Executive Officer and a director of the Company, isthe sole managing member and significant equity interest holder of Eiccose. The Company made a payment to Eiccose of $0.1 million representingreimbursement of certain previously incurred expenses, including payments and accrued amounts owed to Stanford in connection with the license agreementfor the treatment of Lymphedema (the “Lymphedema License Agreement”) and the license agreement for the treatment of PAH (the102 “PAH License Agreement”). The Eiccose APA also provided that, upon a next round of financing pursuant to which the Company sold shares of capital stockresulting in gross proceeds to the Company of at least $25.0 million, the Company would issue to Eiccose fully vested shares of the Company’s commonstock equal to 1.75% of the total number of the Company’s outstanding capital stock, before Merger. In October 2015, the Company recorded $1.5 million inresearch and development expenses and a corresponding liability representing the fair value of the Company’s obligation to issue common stock to Eiccose.On March 22, 2016, the Company issued to Eiccose 96,300 fully vested shares of the Company’s common stock pursuant to the terms of the Eiccose APA. Inconnection with this transaction the Company remeasured the fair value of the obligation to issue common stock at the settlement date and the change in fairvalue of $0.2 million was recognized within other expense, net in the consolidated statement of operations during the year ended December 31, 2016. Uponthe settlement of the obligation with the issuance of shares on March 22, 2016, the liability was reclassified to common stock and additional paid-in capitalwithin stockholders’ equity.The Company is also obligated to pay to Eiccose an aggregate of up to a maximum of $10.0 million of commercial milestones in connection with future salesof the product and royalties in the low single-digits based on aggregate annual net sales following the first commercial sale of any product. As of December31, 2016, the product has not reached commercialization and no milestones have been paid.In addition, as a result of this agreement, the Company has assumed the license agreements Eiccose had previously entered into. These include the PAHLicense Agreement, the Lymphedema License Agreement for the treatment of lymphedema and the license agreement with Nippon Kayaku Co., Ltd,(“Nippon”). As part of the agreement, Nippon is obligated to make a payment for royalties in the low single-digits of sales to the Company. In connectionwith the PAH License Agreement and the Lymphedema License Agreement, the Company is obligated to make development and commercial milestonepayments of up to $0.5 million in the aggregate under each contract, increasing annual license maintenance fees ranging from $10,000 to $75,000 over theterm of each license agreement and royalty payments in low single-digits on annual net sales after the first commercial sale of a product under each license.For the year ended December 31, 2015, the Company has recorded $0.2 million to research and development expense including $0.1 million for license feesand $0.1 million for the reimbursement of incurred expenses in connection with the Eiccose APA. For the year ended December 31, 2016, no amounts havebeen recorded to in connection with the Eiccose APA. 8.DebtIn December 2016, the Company entered into an aggregate $25.0 million loan with Oxford Finance LLC (or “Oxford Loan”). The loan matures on July 1,2021. The Company borrowed $15.0 million in December 2016 (or “Tranche A”). The remaining $10.0 million (or “Tranche B”) will be available to theCompany upon achievement of positive top line data from the lonafarnib Phase 2 trial in HDV and positive top line Phase 2 data from at least one of thefollowing programs, including: (i) Lambda in HDV, (ii) Exendin 9-39 in PBH based on the Company’s own IND, (iii) ubenimex in PAH, or (iv) ubenimex inLymphedema.The Oxford Loan bears interest at a floating rate per annum equal to the greater of either the 30-day U.S. Dollar LIBOR reported in the Wall Street Journalplus 6.41% or 6.95%. The Company is required to repay the Tranche A in 18 monthly interest only payments followed by 36 equal monthly payments ofprincipal and interest commencing on the first day of the month following the funding of Tranche A. If the Company receives the Tranche B funds, then theinterest only period is extended by six months followed by 30 equal monthly payments of principal plus accrued interest. At the time of final payment, theCompany is required to pay an exit fee of 7.5% of the original principal balance of each tranche, which will be $1.1 million for Tranche A. The Companyrecorded as a liability and debt discount the exit fee at the origination of the term loan. In addition, the Company incurred loan origination fees and debtissuance costs of $0.3 million which were recorded as a direct deduction from the carrying amount of the related debt liability. The Company is also requiredto pay a 5.0% success fee within 30 days following the FDA’s approval of the Company’s first product. This fee is enforceable within 10 years from thefunding of Tranche A. In connection with the execution of the Loan Agreement, the Company agreed to certain customary representations and warranties.103 The loan is secured by the perfected first priority liens on the Company's assets, including a commitment by the Company to not allow any liens to be placedupon the Company’s intellectual property. The Oxford Loan includes customary events of default, including failure to pay amounts due, breaches ofcovenants and warranties, material adverse effect events, certain cross defaults and judgments, and insolvency. If the Company is unable to comply with thesecovenants or if the Company default on any portion of the outstanding borrowings, the lenders can also impose a 5.0% penalty and restrict access toadditional borrowings under the loan and security agreement. The Company was in compliance with the terms under the Oxford Loan as of December 31,2016.The Company is permitted to make voluntary prepayments of the Oxford Loan with a prepayment fee, calculated as of the loan origination date, equal to (i)3.0% of the loan prepaid during the first 12 months, (ii) 2.0% of the loan prepaid in months 13-24 and (iii) 1.0% of the loan prepaid thereafter. The Companyis required to make mandatory prepayments of the outstanding loan upon the acceleration by lender following the occurrence of an event of default, alongwith a payment of the final payment, the prepayment fee and any other obligations that are due and payable at the time of prepayment.The Company accounts for the amortization of the debt discount utilizing the effective interest method. The Company recorded interest expense of$5,000 for the year ended December 31, 2016. Long-term debt and unamortized discount balances are as follows (in thousands): December 31, 2016 Face value of term loan $15,000 Exit fee 1,125 Unamortized debt discount associated with exit fee, debt issuance costs and loan origination fees (1,398)Term loan, net $14,727 As of December 31, 2016, future minimum payments of principal, exit fee and interest expense under the Oxford Loan were as follows (in thousands): Year ending December 31, 2017 $979 2018 3,128 2019 5,758 2020 5,402 2021 4,111 Total future payments 19,378 Less: unamortized interest (3,253)Less: unamortized exit fee (1,125)Face value of term loan $15,000 9.Convertible Promissory Note and Warrant Purchase AgreementOn November 12, 2015, the Company entered into a convertible note and warrant purchase agreement (the “Note and Warrant Purchase Agreement”) withthree lenders under which the Company issued the Notes for an aggregate principal amount of $6.0 million and the Warrants exercisable for shares of theCompany’s equity securities at a purchase price of $0.11 per share, on a post-Merger and post-Reverse Stock Split basis. The terms of the Notes included aprovision whereby the Notes would be automatically converted into equity securities from a qualified financing with proceeds of at least $25.0 million. Theterms of the Warrants included a provision whereby the Warrants would be automatically exercised if the Company consummated a public offering includinga reverse merger (“PO”). If the PO did not occur on or prior to February 28, 2016, the warrant coverage amount was equal to 17.5% of the outstandingprincipal balance of the Notes. The number of warrant shares into which the Warrants could be exercised was equal to the warrant coverage amount dividedby the per share price of the equity securities sold in a qualified financing for an exercise price of $0.11 per share, on a post-Merger and post-Reverse StockSplit basis. The Warrants also include a provision whereby in the event of a PO which would result in the automatic104 exercise of the Warrants and the automatic conversion of the Notes, the exercise price of the warrants would be paid by cancelling any unpaid interest on theNotes.On November 18, 2015, the Company entered into the Subscription Agreement with the holders of the Notes and new investors for the sale of 2,304,430shares of its common stock at purchase price of $17.14 per share for total gross proceeds of $39.5 million. The proceeds were comprised of approximately$6.0 million from the conversion of the Notes and approximately $33.5 million of cash.The Company allocated the aggregate proceeds from the issuance of the Notes first to the Warrants based on the warrants’ fair value and then the residualproceeds were allocated to the debt obligation. As of December 31, 2015 the fair value of warrants of $0.9 million was recorded as a debt discount to beamortized as interest expense over the term of the Note using the effective interest rate method. The fair value of the Warrants was also recorded as acorresponding warrant liability.In addition, the Company incurred debt issuance costs of $21,000 in connection with the Note and Warrant Purchase Agreement. The debt issuance costswere being amortized to interest expense over the term of the Note using the effective interest rate method.Upon the closing of the Private Placement on March 22, 2016, immediately prior to the closing of the Merger, the outstanding balance of the Notes totalingapproximately $6.0 million was converted into 350,040 shares of the Company’s common stock. The Warrants were exercised for 61,254 shares of theCompany’s common stock. During the year ended December 31, 2016, the Company recognized a loss related to the change in fair value of the Warrants of$0.2 million. The warrant liability was reclassified to common stock and additional paid-in capital within stockholders’ equity, upon the exercise of theWarrants and issuance of shares on March 22, 2016.For the year ended December 31, 2016, the Company recognized $0.7 million related to the accrued interest and amortization of the debt discount withininterest expense on the Company’s consolidated statements of operations. The discount was fully amortized upon the conversion of the Notes. 10.Stockholders’ Equity (Deficit)Convertible Preferred StockAs of December 31, 2016, the number of shares of common stock and preferred stock authorized to issue was 200,000,000 and 10,000,000, respectively.The Company has the following series of convertible preferred stock outstanding as of December 31, 2015 (in thousands, except share and per share data): December 31, 2015 SharesAuthorized SharesIssued andOutstanding IssuancePrice andConversionPrice(Per Share) Net CarryingValue LiquidationPreference Series A 454,020 426,680 $18.28 $7,668 $7,800 Series A-1 2,240,559 2,182,422 $6.63 14,899 14,469 2,694,579 2,609,102 $22,567 $22,269 On March 22, 2016, all convertible preferred stock outstanding was converted into common stock as part of the Merger transaction (see Note 5). Theconvertible preferred stock was not redeemable.Common StockThe holders of the Company’s common stock have one vote for each share of common stock. Common stockholders are entitled to dividends when, as, and ifdeclared by the Board of Directors, subject to the prior rights of the105 convertible preferred stockholders. As of December 31, 2016, no dividends had been declared by the Board of Directors.The Company had reserved shares of common stock for issuance as follows: December 31, 2016 2015 Convertible preferred stock, on as-converted basis — 2,609,102 Options issued and outstanding 1,212,044 254,058 Options available for future grants 646,778 19,689 Total 1,858,822 2,882,849 Common stock issued in connection with the Asset Purchase Agreement (see Note 7), the Note and Warrant Purchase Agreement (see Note 9) were excludedfrom the total of reserved shares of common stock for issuance as of December 31, 2015, as these shares were not determinable as of December 31, 2015.Warrant LiabilityThe Company issued the Warrants in connection with the issuance of the Notes (see Note 9). As of December 31, 2015, the Company accounted for theWarrants as a liability at fair value as the number of shares were not fixed and determinable at the issuance date. The Company adjusted the liability forchanges in fair value until the exercise of the Warrants in March, 2016, when the number of shares to be exercised became fixed, and the Warrants wereautomatically exercised into common stock. The warrant liability was immediately reclassified to common stock and additional paid in capital withinstockholders’ deficit. The change in fair value of the warrant liability was recognized as a component of other expense, net in the consolidated statements ofoperations.The Company assumed from Celladon fully exercisable warrants outstanding for the purchase of 10,180 shares of common stock. The warrants have anexercise price of $84.15 and expire in October 2018. 11.Stock Option PlanIn 2009, the Company adopted the 2009 Equity Incentive Plan or the Plan. Under the Plan, shares of the Company’s common stock have been reserved forthe issuance of stock options to employees, directors, and consultants under terms and provisions established by the Board of Directors. Under the terms ofthe Plan, options may be granted at an exercise price not less than fair market value. For employees holding more than 10% of the voting rights of all classesof stock, the exercise prices for incentive and non-statutory stock options may not be less than 110% of fair market value, as determined by the Board ofDirectors. The terms of options granted under the Plan may not exceed ten years. The vesting schedule of newly issued option grants is generally four years.As discussed in Note 5, the Company assumed all of the outstanding options, whether or not vested, under the Eiger Plan, with such options henceforthrepresenting the right to purchase a number of shares of the Company’s common stock equal to approximately 0.09 multiplied by the number of shares ofEiger common stock previously represented by such options. For accounting purposes, however, the Company is deemed to have assumed the Celladon 2013Equity Incentive Plan.Because the Company is considered to be the acquirer for accounting purposes, the pre-Merger vested stock options granted by Celladon are deemed to havebeen exchanged for equity awards of the Company and, as such, the portion of the acquisition date fair value of these equity awards attributable to pre-Merger service to Celladon were accounted for as a component of the consideration transferred, which was inconsequential to the consolidated financialstatements.The exchange of options to purchase shares of Eiger common stock for options to purchase shares of the Combined Company, was accounted for as amodification of the awards because the legal exchange of the awards is considered a modification of Eiger stock options. The modification of the stockoptions did not result in any incremental compensation expense as the modification did not increase the fair value of the stock options.106 In June 2016, the Company’s board of directors adopted and in August 2016 the Company’s stockholders approved the amended and restated 2013 EquityIncentive Plan (the “Restated 2013 Plan”), which increased the number of shares reserved for grant by 1,296,683 shares. Under the terms of the Restated 2013Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units and other awards to individuals who are thenemployees, officers, non-employee directors or consultants of the Company. All awards granted prior to the approval of the Restated 2013 Plan remainsubject to the terms of the previous plans and the applicable award agreements. The following table summarizes stock option activity under the Company’sstock based compensation plan during the year ended December 31, 2016 (in thousands, except share data): SharesAvailablefor Grant Numberof Options Weighted-AverageExercisePricePer Option Weighted-AverageRemainingContractualLife(in Years) AggregateIntrinsicValue Outstanding as of December 31, 2015 19,689 254,058 $1.94 $3,369 Additional options authorized 1,554,833 Options assumed in the merger 37,276 $177.57 Granted (950,572) 950,572 $15.87 Exercised (7,034) $5.93 Canceled 22,828 (22,828) $224.21 Outstanding as of December 31, 2016 646,778 1,212,044 $14.06 9.0 $2,414 Vested and expected to vest as of December 31, 2016 1,131,223 $14.16 9.0 $2,230 Vested and exercisable as of December 31, 2016 248,505 $15.95 8.4 $882 The aggregate intrinsic values of options outstanding, exercisable, vested and expected to vest were calculated as the difference between the exercise price ofthe options and the fair value of the Company’s common stock as of December 31, 2016.The aggregate intrinsic value of stock options exercised in 2016, 2015 and 2014 was $0.1 million, $0.9 million and zero, respectively.Stock Options Granted to EmployeesDuring the years ended December 31, 2016 and 2015, the Company granted employees the stock options for 902,028 and 166,793 shares, respectively, withweighted-average grant date fair value of $10.40 and $1.09 per share, respectively. There were no employee stock options granted during the year endedDecember 31, 2014. The total grant date fair value of employee options that vested during the years ended December 31, 2016, 2015 and 2014 was $2.0million, $6,000 and $70,000, respectively.The Company records stock-based compensation of stock options granted to employees by estimating the fair value of stock-based awards using the Black-Scholes option pricing model and amortizing the fair value of the stock-based awards granted over the applicable vesting period of the awards on a straight-line basis. The fair value of employee stock options was estimated using the following weighted-average assumptions: Year Ended December 31, 2016 2015 2014 Expected term (in years) 5.27 - 6.08 5.00 - 6.08 — Volatility 73.91% - 78.00% 77.58% - 97.62% — Risk free interest rate 1.21% - 2.27% 1.44% - 1.75% — Dividend yield — — — 107 Each of these inputs is subjective and generally requires significant judgment to determine.Fair Value of Common Stock: Prior to the Merger, the fair value of the shares of common stock underlying stock options was determined by theCompany’s Board of Directors. In order to determine the fair value of the common stock at the time of grant of the option, the Board of Directorsconsidered, among other things, valuations performed by an independent third-party. Because there was no public market for the Company’scommon stock, the Board of Directors exercised reasonable judgment and considered a number of objective and subjective factors to determine thebest estimate of the fair value of the Company’s common stock, including important developments in the Company’s operations, sales of convertiblepreferred stock, actual operating results and financial performance, the conditions in the life sciences industry and the economy in general, the stockprice performance and volatility of comparable public companies, and the lack of liquidity of the Company’s common stock, among other factors.Following the Merger, the Company’s Board of Directors determined the fair value of each share of underlying common stock based on the closingprice of the Company’s common stock as reported on the date of grant.Expected Term: The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding and isdetermined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term for employee options).Expected Volatility: Since the Company does not have a long trading history for its common stock, the expected volatility was estimated based onthe average volatility for comparable publicly traded biotechnology companies over a period equal to the expected term of the stock option grants.The comparable companies were chosen based on their similar size, or stage in the life cycle.Risk-Free Interest Rate: The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periodscorresponding with the expected term of option.Expected Dividend: The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock. Therefore,the Company used an expected dividend yield of zero.Stock Options Granted to Non-EmployeesThe Company grants stock options to non-employees in exchange for services rendered. During the years ended December 31, 2016, 2015 and 2014, theCompany granted to non-employees stock options for 48,544, 46,134 and 24,506 shares, respectively. Stock-based compensation expense related to stockoptions granted to non-employees is recognized as the stock options are earned and will fluctuate as the estimated fair value of the common stock fluctuatesuntil the awards vest. The Company believes that the estimated fair value of the stock options is more readily measurable than the fair value of the servicesrendered.The fair value of the stock options granted to non-employees is estimated at each reporting date using the Black-Scholes option-pricing model using similarassumptions as for employees except that the expected term is based on the options’ remaining contractual term instead of the simplified method: Year Ended December 31, 2016 2015 2014 Remaining contractual term (in years) 6.75 – 10.00 7.75 – 10.00 8.75 – 9.67 Volatility 84.42% – 98.13% 85.83% – 90.50% 87.53% – 94.17% Risk-free interest rate 1.37% – 2.50% 1.73% – 2.24% 2.17% – 2.69% Dividend yield — — —108 Stock-Based Compensation ExpenseTotal stock-based compensation expense recognized for options granted to employees and non-employees was as follows (in thousands): Year Ended December 31, 2016 2015 2014 Research and development $737 $64 $13 General and administrative 2,453 163 14 Total stock-based compensation expense $3,190 $227 $27 As of December 31, 2016, the total unrecognized compensation expense related to unvested employee options was $9.4 million, which the Company expectsto recognize over an estimated weighted average period of 3.4 years. 12.Income TaxesNo provision for income taxes was recorded for the years ended December 31, 2016, 2015 and 2014. The Company has incurred net operating losses for allthe periods presented. The Company has not reflected any benefit of such net operating loss carryforwards in the accompanying consolidated financialstatements. The Company has established a full valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of suchassets.The effective tax rate of the provision for income taxes differs from the federal statutory rate as follows: Year Ended December 31, 2016 2015 2014 Federal statutory income tax rate 34.00% 34.00% 34.00%State income taxes, net of federal benefit (0.21) 6.11 6.14 Federal and state tax credits 4.68 2.54 4.30 Change in valuation allowance (36.67) (42.14) (44.19)Stock-based compensation (1.26) (0.49) (0.23)Other, net (0.54) (0.02) (0.02)Provision (benefit) for income taxes —% —% —% The components of the deferred tax assets and liabilities are as follows (in thousands): 2016 2015 Deferred tax assets: Net operating loss carryforwards $19,882 $9,030 Tax credits 5,344 1,133 Depreciation and amortization 3,025 1,501 Accruals and reserves 936 254 Gross deferred tax assets 29,187 11,918 Valuation allowance (29,187) (11,918)Net deferred tax assets $— $— Due to the Company’s lack of earnings history, the deferred tax assets have been fully offset by a valuation allowance as of December 31, 2016 and 2015.The valuation allowance increased by $17.3 million and $5.6 million during the years ended December 31, 2016 and 2015, respectively.Certain amounts in the prior year's presentation of gross deferred tax assets have been reclassified to conform to the current year's presentation. Thesereclassifications had no impact on previously reported consolidated statements of operations. 109 As of December 31, 2016, the Company had approximately $54.4 million and $25.2 million, respectively, of federal and state operating loss carryforwardsavailable to reduce future taxable income that will begin to expire in 2030 and 2028, respectively, for federal and state tax purposes.As of December 31, 2016, the Company also had research and development tax credit carryforwards of approximately $0.2 million and $0.6 million forfederal and state purposes available to offset future taxable income tax, respectively. If not utilized, the federal carryforwards will expire in various amountsbeginning in 2028, and the state credits can be carried forward indefinitely.As of December 31, 2016, the Company had orphan drug tax credit carryforwards of approximately $6.6 million for federal purposes available to offset futuretaxable income tax. If not utilized, the federal carryforwards will begin to expire in 2033.Utilization of the NOL and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurredor that could occur in future, as required by Section 382 of the Code, as well as similar state and foreign provisions. These ownership changes may limit theamount of NOL and tax credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. The Company assessedwhether an ownership change, as defined by Section 382 of the Code, occurred from its formation through December 31, 2016. Based upon this assessmentno reduction was made to the federal and state NOL carryforwards or federal and state tax credit carryforwards under these rules.Uncertain Tax PositionsA reconciliation of the Company’s unrecognized tax benefits for the years ended December 31, 2016, 2015 and 2014 is as follows (in thousands): Year Ended December 31, 2016 2015 2014 Balance at beginning of year $404 $99 $97 Additions based on tax positions related to prior year 19 46 — Additions based on tax positions related to current year 1,408 259 2 Balance at end of year $1,831 $404 $99If the $1.8 million of unrecognized tax benefits is recognized, there would not be an effect on the effective tax rate. The Company does not expect theunrecognized tax benefits to change significantly over the next 12 months. At December 31, 2016, the unrecognized tax benefits for uncertain tax positionswere offset against deferred tax assets and would not affect the income tax rate if recognized due to the Company being in a full valuation allowanceposition.The Company’s policy is to account for interest and penalties in tax expense on the statement of operations. The Company files income tax returns in the U.S.federal and state jurisdictions. All periods since inception are subject to examination by U.S. federal and state jurisdictions. There were no such interest orpenalties during the years ended December 31, 2016, 2015 and 2014. 13.Legal MattersIn July 2015, following Celladon’s announcements of the negative CUPID 2 data and the suspension of further research and development activities and thesubsequent declines of the price of its common stock, three putative class actions were filed in the U.S. District Court for the Southern District of Californiaagainst Celladon and certain of its current and former officers. The complaints generally alleged that the defendants violated Sections 10(b) and 20(a) of theSecurities Exchange Act of 1934, as amended (the “Exchange Act”), by making materially false and misleading statements regarding the clinical trialprogram for MYDICAR, thereby artificially inflating the price of Celladon’s common stock. The complaints sought unspecified monetary damages and otherrelief, including110 attorneys’ fees. On December 9, 2015, the district court consolidated the three putative securities class actions and appointed a lead plaintiff to represent theputative class. The lead plaintiff filed a consolidated amended complaint on February 29, 2016.On October 7, 2016, the district court granted defendants’ motion to dismiss the consolidated amended complaint and granted leave to amend within 60 daysfrom the date of the district court’s order. The lead plaintiff subsequently filed a notice of intent not to amend the consolidated amended complaint andinstead indicated that it intended to appeal the district court’s decision. On December 9, 2016, the district court closed the case.On December 28, 2016, the lead plaintiff filed a notice to the United States Court of Appeals for the Ninth Circuit appealing the district court’s orderdismissing the consolidated amended complaint. The deadline to file the appellant’s opening brief is April 7, 2017. It is possible that additional suits will be filed, or allegations made by stockholders, with respect to these same or other matters and also naming the Companyand/or Celladon’s former officers and directors as defendants. The Company believes that it has meritorious defenses and intends to defend these lawsuitsvigorously. Due to the early stage of these proceedings, the Company is not able to predict or reasonably estimate the ultimate outcome or possible lossesrelating to these claims. 14.Commitments and ContingenciesLease AgreementIn March 2015, the Company entered into a non-cancelable facility lease agreement for an office facility in Palo Alto, California. The lease commenced onApril 1, 2015 and expires 36 months after the commencement date. The lease has one two-year renewal option prior to expiration and includes rent escalationclauses through the lease term. Scheduled rent increases are recognized as deferred rent and are amortized on a straight-line basis over the term of the lease.The Company has provided a security deposit of $21,000 as collateral for the lease, which is included in other assets in the Company’s consolidated balancesheet as of December 31, 2015.In October 2016, the Palo Alto lease was modified to include two additional suites, bringing the total leased space to 3,877 square feet. The lease commencedon January 4, 2017 and expires in March 2018. The lease has one two-year renewal option prior to expiration and includes rent escalation clauses through thelease term. The security deposit was increased up to $49,000, which is included in other assets in the Company’s consolidated balance sheet as ofDecember 31, 2016.In December 2015, the Company entered into a sublease agreement for an office facility in Palo Alto, California. The sublease commenced on January 26,2016 and expires on March 30, 2017. The Company provided a security deposit of $16,000 as collateral for the sublease, which is included in other assets inthe Company’s consolidated balance sheet as of December 31, 2016 and 2015.Future aggregate minimum lease payments under the non-cancelable operating leases are as follows (in thousands): Year ending December 31, Amounts 2017 330 2018 71 Total $401 Rent expense was $ 0.3 million, $0.1 million and $42,000 for the years ended December 31, 2016, 2015 and 2014, respectively. 111 Other CommitmentsThe Company is obligated to make future payments to third parties under asset purchase and license agreements, including royalties and payments thatbecome due and payable on the achievement of certain development and commercialization milestones. The Company has not included these potentialpayment obligations in the table above as the amount and timing of such payments are not known. 15.Related Party TransactionsIn connection with the license agreement the Company holds with Stanford, Stanford owned Series A and Series A-1 convertible preferred shares of theCompany. For the year ended December 31, 2015, the Company recorded research and development expense of $89,000 for charges including thereimbursement of patent fees and license fees in connection with the Exendin 9-39 Purchase Agreement and the Lymphedema License Agreement. As ofDecember 31, 2015, the Company owed $55,000 to Stanford, which is recorded in accounts payable. This preferred stock was converted into common stockupon the Merger and then sold during the year ended December 31, 2016.As disclosed in Note 7, the Company entered into license agreements with EGI, which is owned by the founder of the Company.As disclosed in Note 7, the Company entered into an asset purchase agreement with Eiccose, which is owned by the Company’s chief executive officer. 112 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNoneITEM 9A. Controls and ProceduresEvaluation of Disclosure Controls and Procedures.We are responsible for maintaining disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Disclosurecontrols and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that we file orsubmit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosurecontrols and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reportsthat we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and ourprincipal financial officer, as appropriate to allow timely decisions regarding required disclosure.Based on our management’s evaluation (with the participation of our principal executive officer and our principal financial officer) of our disclosure controlsand procedures as required by Rule 13a-15 under the Exchange Act, our principal executive officer and our principal financial officer have concluded thatour disclosure controls and procedures were effective to achieve their stated purpose as of December 31, 2016, the end of the period covered by this report.Management’s Report on Internal Control over Financial Reporting.Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange ActRule 13a-15(f). Internal control over financial reporting is a process designed under the supervision and with the participation of our management, includingour principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.During the audit of our consolidated financial statements for the years ended December 31, 2015 and 2014, a material weakness was identified in our internalcontrol over financial reporting. The material weakness that was identified related to a lack of sufficient accounting resources and personnel that limits ourability to adequately segregate duties, perform sufficient review and approval of manual journal entries posted to the general ledger, establish definedaccounting policies and procedures or perform timely reviews of account reconciliations or accounting estimates. Because of the material weakness, ourprincipal executive officer and principal financial officer concluded that the Company did not maintain effective internal control over financial reporting asof December 31, 2015 and 2014.During 2016 we implemented measures to improve our disclosure controls and procedures and internal control over financing reporting to address theunderlying causes of the previously identified material weakness, including (i) the hiring of our Controller and other accounting personnel, (ii) establishingsegregation of duties for review and approval of manual journal entries, (iii) establishing accounting policies and procedures, (iv) performing timely reviewsof account reconciliations and accounting estimates, and (v) implementing appropriate disclosure controls and procedures. We believe the remediation stepsoutlined above were sufficient to remediate the previously identified material weakness in internal control over financial reporting as discussed above.As of December 31, 2016, our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by theCommittee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 Framework). Based on thisassessment, our management concluded that, as of December 31, 2016, our internal control over financial reporting was effective based on those criteria.Pursuant to Regulation S-K 308(b), this Annual Report on Form 10-K does not include an attestation report of our company’s registered public accountingfirm regarding internal control over financial reporting.113 Changes in Internal Control over Financial Reporting.Except as otherwise described above under “Management’s Report on Internal Control over Financial Reporting”, there were no material changes in ourinternal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter endedDecember 31, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. Other InformationNone. 114 PART IIIITEM 10. Directors, Executive Officers and Corporate Governance Except as set forth below, the information required by this item is incorporated by reference from our definitive Proxy Statement to be filed with the SEC inconnection with our 2017 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2016.We have adopted a Code of Business Conduct and Ethics that applies to all of our directors, officers and employees, including our principal executive officerand principal financial officer. A current copy of the code is posted on the Investors Corporate Governance section of our website, which is located atwww.eigerbio.com.We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of this Code of BusinessConduct and Ethics by posting such information on our website, at the address and location specified above and, to the extent required by the listingstandards of The NASDAQ Global Market, by filing a Current Report on Form 8-K with the SEC, disclosing such information. ITEM 11. Executive CompensationThe information required by this item is incorporated by reference from our definitive Proxy Statement to be filed with the SEC in connection with our 2017Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2016. ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this item is incorporated by reference from our definitive Proxy Statement to be filed with the SEC in connection with our 2017Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2016. ITEM 13. Certain Relationships and Related Party Transactions, and Director IndependenceThe information required by this item is incorporated by reference from our definitive Proxy Statement to be filed with the SEC in connection with our 2017Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2016. ITEM 14. Principal Accounting Fees and ServicesThe information required by this item is incorporated by reference from our definitive Proxy Statement to be filed with the SEC in connection with our 2017Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2016. 115 PART IVITEM 15. Exhibits and Financial Statement Schedules (a)Financial Statements and Financial Statement Schedules 1.Financial StatementsSee Index to Financial Statements at Item 8 herein. 2.Financial Statement SchedulesAll other schedules are omitted because they are not applicable or the required information is shown in the financial statements ornotes thereto. 3.ExhibitsThe exhibits listed in the Exhibit Index immediately following the signature page of this Annual Report on Form 10-K are filed orincorporated by reference as part of this report. (b)See Exhibits listed under Item 15(a)3. (c)See Item 15(a)2 above.116 SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. Eiger BioPharmaceuticals, Inc. Date: 22 March, 2017 By: /s/ David A. Cory David A. Cory Director, President and Chief Executive Officer (Principal Executive Officer) Eiger BioPharmaceuticals, Inc. Date: 22 March, 2017 By: /s/ James Welch James Welch Chief Financial Officer (Principal Financial Officer) POWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints David Cory and James Welch, andeach of them, as his or her attorneys-in-fact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to this report, andto file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying andconfirming all that said attorneys-in-fact, and each of them, or his or her substitute or substitutes may do or cause to be done by virtue hereof.117 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrantin the capacities and on the dates indicated: Signature Title Date /s/ David A. CoryDavid Cory President and Chief Executive Officer(Principal Executive Officer) 22 March, 2017 /s/ James WelchJames Welch Chief Financial Officer(Principal Financial and Accounting Officer) 22 March, 2017 /s/ Thomas J. DietzThomas J. Dietz Chairman of the Board of Directors 22 March, 2017 /s/ Edgar G. EnglemanEdgar G. Engleman Member of the Board of Directors 22 March, 2017 /s/ Nina KjellsonNina Kjellson Member of the Board of Directors 22 March, 2017 /s/ Jeffrey S. GlennJeffrey S. Glenn Member of the Board of Directors 22 March, 2017 /s/ Charles J. Bramlage Member of the Board of Directors 22 March, 2017Charles J. Bramlage 118 INDEX TO EXHIBITSExhibitNumber Description of Document 2.1 Agreement and Plan of Merger and Reorganization, dated as of November 18, 2015, by and among Celladon Corporation, CelladonMerger Sub, Inc., and Eiger BioPharmaceuticals, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filedwith the SEC on November 19, 2015). 3.1 Amended and Restated Certificate of Incorporation of Celladon Corporation (incorporated by reference to Exhibit 3.1 to the CurrentReport on Form 8-K of Celladon Corporation, filed with the SEC on February 10, 2014). 3.2 Amended and Restated Bylaws of Celladon Corporation (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K,filed with the SEC on February 10, 2014). 3.3 Certificate of Amendment of Amended and Restated Certificate of Incorporation of Celladon Corporation (incorporated by reference toExhibit 3.1 to Current Report on Form 8-K, filed with the SEC on March 23, 2016). 3.4 Certificate of Amendment of Amended and Restated Certificate of Incorporation of Celladon Corporation (incorporated by reference toExhibit 3.2 to Current Report on Form 8-K, filed with the SEC on March 23, 2016). 4.1 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-1, as amended (FileNo. 333-191688), originally filed with the SEC on October 29, 2013). 4.2 Amended and Restated Investor Rights Agreement by and among Celladon Corporation and certain of its stockholders, dated February 4,2014 (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-1, as amended (File No. 333-191688), originallyfiled with the SEC on October 11, 2013). 4.3 Form of Warrant to Purchase Common Stock issued to participants in Celladon Corporation’s Convertible Debt and Warrant financing,dated October 15, 2013 (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-1, as amended (File No. 333-191688), originally filed with the SEC on October 11, 2013). 10.1+ Form of Indemnity Agreement by and between Celladon Corporation and its directors and officers (incorporated by reference to Exhibit10.1 to the Registration Statement on Form S-1, as amended (File No. 333-191688), originally filed with the SEC on October 11, 2013). 10.2+ Celladon Corporation 2001 Stock Option Plan and Form of Notice of Grant of Stock Option, Stock Option Agreement and Stock OptionExercise Notice thereunder (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1, as amended (File No.333-191688), originally filed with the SEC on October 11, 2013). 10.3+ Celladon Corporation 2012 Equity Incentive Plan and Form of Stock Option Grant Notice, Option Agreement and Notice of Exercisethereunder (incorporated by reference to Exhibit 10.3 to the Registration Statement on Form S-1, as amended (File No. 333-191688),originally filed with the SEC on October 11, 2013). 10.4+ Celladon Corporation Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.6 to the RegistrationStatement on Form S-1, as amended (file No. 333-191688), originally filed with the SEC on October 11, 2013). 10.5 Eiger BioPharmaceuticals, Inc. 2009 Equity Incentive Plan and Form of Notice of Grant of Stock Option, Stock Option Agreement andStock Option Exercise Notice thereunder (incorporated by reference to Exhibit 10.44 to the Registration Statement on Form S-4, asamended (File No. 333-208521), originally filed with the SEC on December 14, 2015). 119 ExhibitNumber Description of Document 10.6+ Eiger BioPharmaceuticals, Inc. 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registration Statement onForm 10-Q (File No. 001-36183), filed with the SEC on November 8, 2016). 10.7+ Eiger BioPharmaceuticals, Inc. Amended and Restated 2013 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 tothe Registration Statement on Form 10-Q (File No. 001-36183), filed with the SEC on November 8, 2016). 10.8 Lease, dated as of March 19, 2015 by and between JTC, a California general partnership and Eiger BioPharmaceuticals, Inc. (incorporatedby reference to Exhibit 10.38 to the Registration Statement on Form S-4, as amended (File No. 333-208521), originally filed with the SECon December 14, 2015). 10.9+ Offer Letter, dated as of December 5, 2008, by and between Eiger BioPharmaceuticals, Inc. and David Cory (incorporated by reference toExhibit 10.39 to the Registration Statement on Form S-4, as amended (File No. 333-208521), originally filed with the SEC on December14, 2015). 10.10+ Offer Letter, dated as of August 10, 2015, by and between Eiger BioPharmaceuticals, Inc. and James Welch (incorporated by reference toExhibit 10.40 to the Registration Statement on Form S-4, as amended (File No. 333-208521), originally filed with the SEC on December14, 2015). 10.11+ Offer Letter, dated as of July 31, 2015, by and between Eiger BioPharmaceuticals, Inc. and James Shaffer (incorporated by reference toExhibit 10.41 to the Registration Statement on Form S-4, as amended (File No. 333-208521), originally filed with the SEC on December14, 2015). 10.12+ Offer Letter, dated as of April 3, 2015, by and between Eiger BioPharmaceuticals, Inc. and Joanne Quan (incorporated by reference toExhibit 10.42 to the Registration Statement on Form S-4, as amended (File No. 333-208521), originally filed with the SEC on December14, 2015). 10.13+ Offer Letter, dated as of October 1, 2015, by and between Eiger BioPharmaceuticals, Inc. and Eduardo Martins (incorporated by referenceto Exhibit 10.43 to the Registration Statement on Form S-4, as amended (File No. 333-208521), originally filed with the SEC onDecember 14, 2015). 10.14† Asset Purchase Agreement, effective as of December 8, 2010, by and between Eiger BioPharmaceuticals, Inc. and Eiger GroupInternational, Inc. (incorporated by reference to Exhibit 10.45 to the Registration Statement on Form S-4, as amended (File No. 333-208521), originally filed with the SEC on December 14, 2015). 10.15† Asset Purchase Agreement, dated September 25, 2015, by and between Eiger BioPharmaceuticals, Inc. and Tracey McLaughlin andColleen Craig (incorporated by reference to Exhibit 10.46 to the Registration Statement on Form S-4, as amended (File No. 333-208521),originally filed with the SEC on December 14, 2015). 10.16† Asset Purchase Agreement, dated October 29, 2015, by and between Eiccose, LLC and Eiger BioPharmaceuticals, Inc. (incorporated byreference to Exhibit 10.47 to the Registration Statement on Form S-4, as amended (File No. 333-208521), originally filed with the SEC onDecember 14, 2015). 10.17† Exclusive Agreement, dated May 1, 2015, by and between Eiccose, LLC and the Board of Trustees of the Leland Stanford JuniorUniversity (incorporated by reference to Exhibit 10.48 to the Registration Statement on Form S-4, as amended (File No. 333-208521),originally filed with the SEC on December 14, 2015). 10.18† Exclusive Agreement, dated October 27, 2015, by and between Eiccose, LLC and the Board of Trustees of the Leland Stanford JuniorUniversity (incorporated by reference to Exhibit 10.49 to the Registration Statement on Form S-4, as amended (File No. 333-208521),originally filed with the SEC on December 14, 2015). 10.19† License Agreement, dated September 3, 2010, by and between Eiger BioPharmaceuticals, Inc. and Merck Corporation (incorporated byreference to Exhibit 10.50 to the Registration Statement on Form S-4, as amended (File No. 333-208521), originally filed with the SEC onDecember 14, 2015). 120 ExhibitNumber Description of Document 10.20† License Agreement, effective as of December 19, 2014, by and between EB Pharma, LLC and Janssen Parmaceutica NV (incorporated byreference to Exhibit 10.51 to the Registration Statement on Form S-4, as amended (File No. 333-208521), originally filed with the SEC onDecember 14, 2015). 10.21† License Agreement, dated as of May 1, 2015, by and between Eiccose, LLC and Nippon Kayaku Co., Ltd. (incorporated by reference toExhibit 10.52 to the Registration Statement on Form S-4, as amended (File No. 333-208521), originally filed with the SEC on December14, 2015). 10.22 Sublease Agreement, dated as of January 8, 2016, by and between Baker Hughes Oilfield Operations, Inc. and Eiger BioPharmaceuticals,Inc. (incorporated by reference to Exhibit 10.53 to the Registration Statement on Form S-4, as amended (File No. 333-208521), originallyfiled with the SEC on December 14, 2015). 10.23† License Agreement, dated as of April 20, 2016, by and between Eiger BioPharmaceuticals, Inc. and Bristol-Myers Squibb Company(incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-3/A (File No. 333-212114), filed with the SEC onAugust 2, 2016). 10.24 Common Stock Purchase Agreement, dated as of April 20, 2016, by and between Eiger BioPharmaceuticals, Inc. and Bristol-Myers SquibbCompany (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-3, as amended (File No. 333-212114) filedwith the SEC on June 17, 2016). 10.25 Controlled Equity Offering Sales Agreement, dated June 17, 2016, by and between Eiger BioPharmaceuticals, Inc. and Cantor Fitzgerald& Co. (incorporated by reference to Exhibit 1.2 to the Registration Statement on Form S-3, filed with the SEC on June 17, 2016). 10.26 Loan and Security Agreement, dated December 30, 2016, by and between Eiger BioPharmaceuticals, Inc. and Oxford Finance LLC. 16.1 Letter of Ernst & Young LLP dated April 28, 2016 (incorporated by reference to Exhibit 16.1 to the Current Report on 8-K, filed with theSEC on April 28, 2016). 21.1 List of subsidiaries. 23.1 Consent of Independent Registered Public Accounting Firm. 24.1 Power of Attorney. Reference is made to the signature page hereto. 31.1 Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934. 31.2 Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934. 32.1 Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document +Indicates management contract or compensatory plan.†Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.121 Exhibit 10.26LOAN AND SECURITY AGREEMENTTHIS LOAN AND SECURITY AGREEMENT (as the same may from time to time be amended, modified, supplemented or restated, this“Agreement”) dated as of December 30, 2016 (the “Effective Date”) among OXFORD FINANCE LLC, a Delaware limited liability company with an officelocated at 133 North Fairfax Street, Alexandria, Virginia 22314 (“Oxford”), as collateral agent (in such capacity, “Collateral Agent”), the Lenders listed onSchedule 1.1 hereof or otherwise a party hereto from time to time including Oxford in its capacity as a Lender (each a “Lender” and collectively, the“Lenders”), and EIGER BIOPHARMACEUTICALS, INC., a Delaware corporation (“Parent”), EB Pharma, LLC, a Delaware limited liability company (“EBPharma”) and EBPI Merger, Inc. (“EBPI”), each with offices located at 350 Cambridge Ave. Suite 350, Palo Alto, CA 94306 (Parent, EB Pharma and EBPI,individually and collectively, jointly and severally, “Borrower”), provides the terms on which the Lenders shall lend to Borrower and Borrower shall repaythe Lenders. The parties agree as follows:1.ACCOUNTING AND OTHER TERMS1.1Accounting terms not defined in this Agreement shall be construed in accordance with GAAP. Calculations and determinations must bemade in accordance with GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13. All other termscontained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein. Allreferences to “Dollars” or “$” are United States Dollars, unless otherwise noted.2.LOANS AND TERMS OF PAYMENT2.1Promise to Pay. Borrower hereby unconditionally promises to pay each Lender, the outstanding principal amount of all Term Loansadvanced to Borrower by such Lender and accrued and unpaid interest thereon and any other amounts due hereunder as and when due in accordance with thisAgreement.2.2Term Loans.(a)Availability. (i) Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly, to make termloans to Borrower on the Effective Date in an aggregate amount of Fifteen Million Dollars ($15,000,000.00) according to each Lender’s Term A LoanCommitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a “Term A Loan”, and collectively as the “Term ALoans”). After repayment, no Term A Loan may be re-borrowed.(ii) Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly, during the Second DrawPeriod, to make term loans to Borrower in an aggregate amount up to Ten Million Dollars ($10,000,000.00) according to each Lender’s Term B LoanCommitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a “Term B Loan”, and collectively as the “Term BLoans”; each Term A Loan or Term B Loan is hereinafter referred to singly as a “Term Loan” and the Term A Loans and the Term B Loans are hereinafterreferred to collectively as the “Term Loans”). After repayment, no Term B Loan may be re-borrowed.(b)Repayment. Borrower shall make monthly payments of interest only commencing on the first (1st) Payment Date following theFunding Date of each Term Loan, and continuing on the Payment Date of each successive month thereafter through and including the Payment Dateimmediately preceding the Amortization Date. Borrower agrees to pay, on the Funding Date of each Term Loan, any initial partial monthly interest paymentotherwise due for the period between the Funding Date of such Term Loan and the first Payment Date thereof. Commencing on the Amortization Date, andcontinuing on the Payment Date of each month thereafter, Borrower shall make consecutive equal monthly payments of principal, together with applicableinterest, in arrears, to each Lender, as calculated by Collateral Agent (which calculations shall be deemed correct absent manifest error) based upon: (1) theamount of such Lender’s Term Loan then outstanding, (2) the effective rate of interest, as determined in Section 2.3(a), and (3) a repayment schedule equal tothirty-six (36) months, if the Amortization Date is August 1, 2018, or thirty (30) months if the Amortization Date is February 1, 2019. All unpaid principaland accrued and unpaid interest with respect to each Term Loan is due and payable in full on the Maturity Date. Each Term Loan may only be prepaid inaccordance with Sections 2.2(c) and 2.2(d). WEST\274507290.5 368986-0001351  (c)Mandatory Prepayments. If the Term Loans are accelerated following the occurrence of an Event of Default, Borrower shallimmediately pay to Lenders, payable to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of: (i) all outstandingprincipal of the Term Loans plus accrued and unpaid interest thereon through the prepayment date, (ii) the Final Payment, (iii) the Prepayment Fee, plus (iv)all other Obligations that are due and payable, including Lenders’ Expenses and interest at the Default Rate with respect to any past due amounts.Notwithstanding (but without duplication with) the foregoing, on the Maturity Date, if the Final Payment had not previously been paid in full in connectionwith the prepayment of the Term Loans in full, Borrower shall pay to Collateral Agent, for payment to each Lender in accordance with its respective Pro RataShare, the Final Payment in respect of the Term Loans.(d)Permitted Prepayment of Term Loans. Borrower shall have the option to prepay all, but not less than all, of the Term Loansadvanced by the Lenders under this Agreement, provided Borrower (i) provides written notice to Collateral Agent of its election to prepay the Term Loans atleast thirty (30) days prior to such prepayment, and (ii) pays to the Lenders on the date of such prepayment, payable to each Lender in accordance with itsrespective Pro Rata Share, an amount equal to the sum of (A) all outstanding principal of the Term Loans plus accrued and unpaid interest thereon throughthe prepayment date, (B) the Final Payment, (C) the Prepayment Fee, plus (D) all other Obligations that are due and payable, including Lenders’ Expenses, ifany, and interest at the Default Rate with respect to any past due amounts.2.3Payment of Interest on the Credit Extensions.(a)Interest Rate. Subject to Section 2.3(b), the principal amount outstanding under the Term Loans shall accrue interest at a floatingper annum rate equal to the Basic Rate, determined by Collateral Agent on the Funding Date of the applicable Term Loan, which interest shall be payablemonthly in arrears in accordance with Sections 2.2(b) and 2.3(e). Interest shall accrue on each Term Loan commencing on, and including, the Funding Date ofsuch Term Loan, and shall accrue on the principal amount outstanding under such Term Loan through and including the day on which such Term Loan ispaid in full.(b)Default Rate. Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall accrueinterest at a floating per annum rate equal to the rate that is otherwise applicable thereto plus five percentage points (5.00%) (the “Default Rate”). Payment oracceptance of the increased interest rate provided in this Section 2.3(b) is not a permitted alternative to timely payment and shall not constitute a waiver ofany Event of Default or otherwise prejudice or limit any rights or remedies of Collateral Agent.(c)360-Day Year. Interest shall be computed on the basis of a three hundred sixty (360) day year, and the actual number of dayselapsed.(d)Debit of Accounts. Collateral Agent and each Lender may debit (or ACH) any deposit accounts, maintained by Borrower or anyof its Subsidiaries, including the Designated Deposit Account, for principal and interest payments or any other amounts Borrower owes the Lenders under theLoan Documents when due. Any such debits (or ACH activity) shall not constitute a set-off. Without limiting the foregoing, Collateral Agent and eachLender shall use commercially reasonable efforts to notify Borrower of any amounts (other than principal and interest payments) debited from Borrower’sdeposit accounts with respect to this Agreement.(e)Payments. Except as otherwise expressly provided herein, all payments by Borrower under the Loan Documents shall be made tothe respective Lender to which such payments are owed, at such Lender’s office in immediately available funds on the date specified herein. Unless otherwiseprovided, interest is payable monthly on the Payment Date of each month. Payments of principal and/or interest received after 12:00 noon Eastern time areconsidered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due thenext Business Day and additional fees or interest, as applicable, shall continue to accrue until paid. All payments to be made by Borrower hereunder or underany other Loan Document, including payments of principal and interest, and all fees, expenses, indemnities and reimbursements, shall be made without set-off, recoupment or counterclaim, in lawful money of the United States and in immediately available funds. WEST\274507290.5 368986-0001352  2.4Secured Promissory Notes. The Term Loans shall be evidenced by a Secured Promissory Note or Notes in the form attached as Exhibit Dhereto (each a “Secured Promissory Note”), and shall be repayable as set forth in this Agreement. Borrower irrevocably authorizes each Lender to make orcause to be made, on or about the Funding Date of any Term Loan or at the time of receipt of any payment of principal on such Lender’s Secured PromissoryNote, an appropriate notation on such Lender’s Secured Promissory Note Record reflecting the making of such Term Loan or (as the case may be) the receiptof such payment. The outstanding amount of each Term Loan set forth on such Lender’s Secured Promissory Note Record shall be prima facie evidence of theprincipal amount thereof owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on such Lender’s SecuredPromissory Note Record shall not limit or otherwise affect the obligations of Borrower under any Secured Promissory Note or any other Loan Document tomake payments of principal of or interest on any Secured Promissory Note when due. Upon receipt of an affidavit of an officer of a Lender as to the loss, theft,destruction, or mutilation of its Secured Promissory Note, Borrower shall issue, in lieu thereof, a replacement Secured Promissory Note in the same principalamount thereof and of like tenor.2.5Fees. Borrower shall pay to Collateral Agent:(a)Facility Fee. A fully earned, non-refundable facility fee of One Hundred Twenty Five Thousand Dollars ($125,000.00) to beshared between the Lenders pursuant to their respective Commitment Percentages payable as follows: (i) Seventy Five Thousand Dollars ($75,000.00) of thefacility fee shall be due and payable on the Effective Date and (ii) the remaining Fifty Thousand Dollars ($50,000.00) of the facility fee shall be due andpayable on the Funding Date of the Term B Loan;(b)Final Payment. The Final Payment, when due hereunder, to be shared between the Lenders in accordance with their respectivePro Rata Shares;(c)Prepayment Fee. The Prepayment Fee, when due hereunder, to be shared between the Lenders in accordance with their respectivePro Rata Shares; and(d)Lenders’ Expenses. All Lenders’ Expenses (including reasonable attorneys’ fees and expenses for documentation andnegotiation of this Agreement) incurred through and after the Effective Date, when due.2.6Withholding. Payments received by the Lenders from Borrower hereunder will be made free and clear of and without deduction for anyand all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any governmental authority(including any interest, additions to tax or penalties applicable thereto). Specifically, however, if at any time any Governmental Authority, applicable law,regulation or international agreement requires Borrower to make any withholding or deduction from any such payment or other sum payable hereunder to theLenders, Borrower hereby covenants and agrees that the amount due from Borrower with respect to such payment or other sum payable hereunder will beincreased to the extent necessary to ensure that, after the making of such required withholding or deduction, each Lender receives a net sum equal to the sumwhich it would have received had no withholding or deduction been required and Borrower shall pay the full amount withheld or deducted to the relevantGovernmental Authority. Borrower will, upon request, furnish the Lenders with proof reasonably satisfactory to the Lenders indicating that Borrower hasmade such withholding payment; provided, however, that Borrower need not make any withholding payment if the amount or validity of such withholdingpayment is contested in good faith by appropriate and timely proceedings and as to which payment in full is bonded or reserved against by Borrower. Theagreements and obligations of Borrower contained in this Section 2.6 shall survive the termination of this Agreement.3.CONDITIONS OF LOANS3.1Conditions Precedent to Initial Credit Extension. Each Lender’s obligation to make a Term A Loan is subject to the conditionprecedent that Collateral Agent and each Lender shall consent to or shall have received, in form and substance satisfactory to Collateral Agent and eachLender, such documents, and completion of such other matters, as Collateral Agent and each Lender may reasonably deem necessary or appropriate,including, without limitation:(a)original Loan Documents, each duly executed by Borrower and each Subsidiary, as applicable; WEST\274507290.5 368986-0001353  (b)duly executed original Control Agreements with respect to any Collateral Accounts maintained by Borrower or any of itsSubsidiaries;(c)duly executed original Secured Promissory Notes in favor of each Lender according to its Term A Loan Commitment Percentage;(d)the certificate(s) for the Shares, together with Assignment(s) Separate from Certificate, duly executed in blank;(e)the Operating Documents and good standing certificates of Borrower and its Subsidiaries certified by the Secretary of State (orequivalent agency) of Borrower’s and such Subsidiaries’ jurisdiction of organization or formation and each jurisdiction in which Borrower and eachSubsidiary is qualified to conduct business, each as of a date no earlier than thirty (30) days prior to the Effective Date;(f)a completed Perfection Certificate for Borrower and each of its Subsidiaries;(g)the Annual Projections, for the current calendar year (receipt of which Collateral Agent hereby acknowledges);(h)duly executed original officer’s certificate for Borrower and each Subsidiary that is a party to the Loan Documents, in a formacceptable to Collateral Agent and the Lenders;(i)certified copies, dated as of date no earlier than thirty (30) days prior to the Effective Date, of financing statement searches, asCollateral Agent shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financingstatements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;(j)a landlord’s consent executed in favor of Collateral Agent in respect of all of Borrower’s and each Subsidiaries’ leased locationsif either (i) the assets at such location are valued in excess of Two Hundred Thousand Dollars ($200,000.00) in the aggregate or (ii) Borrower’s Books aremaintained at any such location;(k)a bailee waiver executed in favor of Collateral Agent in respect of each third party bailee where Borrower or any Subsidiarymaintains Collateral having a book value in excess of Two Hundred Fifty Thousand Dollars ($250,000.00);(l)a duly executed legal opinion of counsel to Borrower dated as of the Effective Date;(m)evidence satisfactory to Collateral Agent and the Lenders that the insurance policies required by Section 6.5 hereof are in fullforce and effect, together with appropriate evidence showing loss payable and/or additional insured clauses or endorsements in favor of Collateral Agent, forthe ratable benefit of the Lenders;(n)a subordination agreement, duly executed by each holder of Subordinated Debt;(o)the Success Fee Agreement; and(p)payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.3.2Conditions Precedent to all Credit Extensions. The obligation of each Lender to make each Credit Extension, including the initialCredit Extension, is subject to the following conditions precedent:(a)receipt by Collateral Agent of an executed Disbursement Letter in the form of Exhibit B attached hereto; WEST\274507290.5 368986-0001354  (b)the representations and warranties in Section 5 hereof shall be true, accurate and complete in all material respects on the date ofthe Disbursement Letter and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to anyrepresentations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations andwarranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall haveoccurred and be continuing or result from the Credit Extension. Each Credit Extension is Borrower’s representation and warranty on that date that therepresentations and warranties in Section 5 hereof are true, accurate and complete in all material respects; provided, however, that such materiality qualifiershall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, furtherthat those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date;(c)in such Lender’s sole and reasonable discretion, there has not been any Material Adverse Change or any material adversedeviation by Borrower from the Annual Projections of Borrower presented to and accepted by Collateral Agent and each Lender;(d)to the extent not delivered at the Effective Date, duly executed original Secured Promissory Notes and Warrants, in number, formand content acceptable to each Lender, and in favor of each Lender according to its Commitment Percentage, with respect to each Credit Extension made bysuch Lender after the Effective Date; and(e)payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.3.3Covenant to Deliver. Borrower agrees to deliver to Collateral Agent and the Lenders each item required to be delivered to CollateralAgent under this Agreement as a condition precedent to any Credit Extension. Borrower expressly agrees that a Credit Extension made prior to the receipt byCollateral Agent or any Lender of any such item shall not constitute a waiver by Collateral Agent or any Lender of Borrower’s obligation to deliver suchitem, and any such Credit Extension in the absence of a required item shall be made in each Lender’s sole discretion.3.4Procedures for Borrowing. Subject to the prior satisfaction of all other applicable conditions to the making of a Term Loan set forth inthis Agreement, to obtain a Term Loan, Borrower shall notify the Lenders (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by12:00 noon Eastern time five (5) Business Days prior to the date the Term Loan is to be made. Together with any such electronic, facsimile or telephonicnotification, Borrower shall deliver to the Lenders by electronic mail or facsimile a completed Disbursement Letter executed by a Responsible Officer or hisor her designee. The Lenders may rely on any telephone notice given by a person whom a Lender reasonably believes is a Responsible Officer or designee.On the Funding Date, each Lender shall credit and/or transfer (as applicable) to the Designated Deposit Account, an amount equal to its Term LoanCommitment.4.CREATION OF SECURITY INTEREST4.1Grant of Security Interest. Borrower hereby grants Collateral Agent, for the ratable benefit of the Lenders, to secure the payment andperformance in full of all of the Obligations, a continuing security interest in, and pledges to Collateral Agent, for the ratable benefit of the Lenders, theCollateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof. Borrower represents, warrants, andcovenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral, subjectonly to Permitted Liens that are permitted by the terms of this Agreement to have priority to Collateral Agent’s Lien. If Borrower shall acquire a commercialtort claim (as defined in the Code), Borrower, shall promptly notify Collateral Agent in a writing signed by Borrower after Borrower becomes aware of suchtort claim, as the case may be, of the general details thereof (and further details as may be required by Collateral Agent) and grant to Collateral Agent, for theratable benefit of the Lenders, in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing tobe in form and substance reasonably satisfactory to Collateral Agent.If this Agreement is terminated, Collateral Agent’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnityobligations) are repaid in full in cash. Upon payment in full in cash of the Obligations (other than inchoate indemnity obligations) and at such time as theLenders’ obligation to make Credit Extensions has terminated, Collateral Agent shall, at the sole cost and expense of Borrower, release its Liens in theCollateral and all rights therein shall revert to Borrower. WEST\274507290.5 368986-0001355  4.2Authorization to File Financing Statements. Borrower hereby authorizes Collateral Agent to file financing statements or take any otheraction required to perfect Collateral Agent’s security interests in the Collateral, without notice to Borrower, with all appropriate jurisdictions to perfect orprotect Collateral Agent’s interest or rights under the Loan Documents, including a notice that any disposition of the Collateral, except to the extentpermitted by the terms of this Agreement, by Borrower, or any other Person, shall be deemed to violate the rights of Collateral Agent under the Code.4.3Pledge of Collateral. Borrower hereby pledges, assigns and grants to Collateral Agent, for the ratable benefit of the Lenders, a securityinterest in all the Shares, together with all proceeds and substitutions thereof, all cash, stock and other moneys and property paid thereon, all rights tosubscribe for securities declared or granted in connection therewith, and all other cash and noncash proceeds of the foregoing, as security for the performanceof the Obligations. On the Effective Date, or, to the extent not certificated as of the Effective Date, within ten (10) days of the certification of any Shares, thecertificate or certificates for the Shares will be delivered to Collateral Agent, accompanied by an instrument of assignment duly executed in blank byBorrower. To the extent required by the terms and conditions governing the Shares, Borrower shall cause the books of each entity whose Shares are part of theCollateral and any transfer agent to reflect the pledge of the Shares. Upon the occurrence and during the continuance of an Event of Default hereunder,Collateral Agent may effect the transfer of any securities included in the Collateral (including but not limited to the Shares) into the name of Collateral Agentand cause new (as applicable) certificates representing such securities to be issued in the name of Collateral Agent or its transferee. Borrower will execute anddeliver such documents, and take or cause to be taken such actions, as Collateral Agent may reasonably request to perfect or continue the perfection ofCollateral Agent’s security interest in the Shares. Unless an Event of Default shall have occurred and be continuing, Borrower shall be entitled to exercise anyvoting rights with respect to the Shares and to give consents, waivers and ratifications in respect thereof, provided that no vote shall be cast or consent,waiver or ratification given or action taken which would be inconsistent with any of the terms of this Agreement or which would constitute or create anyviolation of any of such terms. All such rights to vote and give consents, waivers and ratifications shall terminate upon the occurrence and continuance of anEvent of Default.5.REPRESENTATIONS AND WARRANTIESBorrower represents and warrants to Collateral Agent and the Lenders as follows:5.1Due Organization, Authorization: Power and Authority. Borrower and each of its Subsidiaries is duly existing and in good standing asa Registered Organization in its jurisdictions of organization or formation and Borrower and each of its Subsidiaries is qualified and licensed to do businessand is in good standing in any jurisdiction in which the conduct of its businesses or its ownership of property requires that it be qualified except where thefailure to do so could not reasonably be expected to have a Material Adverse Change. In connection with this Agreement, Borrower and each of itsSubsidiaries has delivered to Collateral Agent a completed perfection certificate signed by an officer of Borrower or such Subsidiary (each as updated fromtime to time, as permitted hereunder, a “Perfection Certificate” and collectively, the “Perfection Certificates”). Borrower represents and warrants that (a)Borrower and each of its Subsidiaries’ exact legal name is that which is indicated on its respective Perfection Certificate and on the signature page of eachLoan Document to which it is a party; (b) Borrower and each of its Subsidiaries is an organization of the type and is organized in the jurisdiction set forth onits respective Perfection Certificate; (c) each Perfection Certificate accurately sets forth each of Borrower’s and its Subsidiaries’ organizational identificationnumber or accurately states that Borrower or such Subsidiary has none; (d) each Perfection Certificate accurately sets forth Borrower’s and each of itsSubsidiaries’ place of business, or, if more than one, its chief executive office as well as Borrower’s and each of its Subsidiaries’ mailing address (if differentthan its chief executive office); (e) Borrower and each of its Subsidiaries (and each of its respective predecessors) have not, in the past five (5) years, changedits jurisdiction of organization, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information setforth on the Perfection Certificates pertaining to Borrower and each of its Subsidiaries, is accurate and complete (it being understood and agreed thatBorrower and each of its Subsidiaries may from time to time update certain information in the Perfection Certificates (including the information set forth inclause (d) above) after the Effective Date to the extent permitted by one or more specific provisions in this Agreement); such updated Perfection Certificatessubject to the review and approval of Collateral Agent. If Borrower or any of its Subsidiaries is not now a Registered Organization but later becomes one,Borrower shall notify Collateral Agent of such occurrence and provide Collateral Agent with such Person’s organizational identification number within five(5) Business Days of receiving such organizational identification number. WEST\274507290.5 368986-0001356  The execution, delivery and performance by Borrower and each of its Subsidiaries of the Loan Documents to which it is a party have been dulyauthorized, and do not (i) conflict with any of Borrower’s or such Subsidiaries’ organizational documents, including its respective Operating Documents, (ii)contravene, conflict with, constitute a default under or violate any material Requirement of Law applicable thereto, (iii) contravene, conflict or violate anyapplicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or such Subsidiary, or any oftheir property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, anyGovernmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect) or are being obtainedpursuant to Section 6.1(b), or (v) constitute an event of default under any material agreement by which Borrower or any of such Subsidiaries, or theirrespective properties, is bound. Neither Borrower nor any of its Subsidiaries is in default under any agreement to which it is a party or by which it or any of itsassets is bound in which such default could reasonably be expected to have a Material Adverse Change.5.2Collateral.(a)Borrower and each its Subsidiaries have good title to, have rights in, and the power to transfer each item of the Collateral uponwhich it purports to grant a Lien under the Loan Documents, free and clear of any and all Liens except Permitted Liens, and neither Borrower nor any of itsSubsidiaries have any Deposit Accounts, Securities Accounts, Commodity Accounts or other investment accounts other than the Collateral Accounts or theother investment accounts, if any, described in the Perfection Certificates delivered to Collateral Agent in connection herewith (as the same may be updatedfrom time to time, provided that any such updates shall be in form and substance acceptable to Collateral Agent and each Lender, in its sole discretion) withrespect of which Borrower or such Subsidiary has given Collateral Agent notice and taken such actions as are necessary to give Collateral Agent a perfectedsecurity interest therein. The Accounts are bona fide, existing obligations of the Account Debtors.(b)On the Effective Date, and except as disclosed on the Perfection Certificate (as the same may be updated from time to time,provided that any such updates shall be in form and substance acceptable to Collateral Agent and each Lender, in its sole discretion) (i) the Collateral is notin the possession of any third party bailee (such as a warehouse), and (ii) no such third party bailee possesses components of the Collateral in excess of TwoHundred Fifty Thousand Dollars ($250,000.00). None of the components of the Collateral shall be maintained at locations other than as disclosed in thePerfection Certificates on the Effective Date or as permitted pursuant to Section 6.11.(c)All Inventory is in all material respects of good and marketable quality, free from material defects.(d)Borrower and each of its Subsidiaries is the sole owner of the Intellectual Property each respectively purports to own, free andclear of all Liens other than Permitted Liens. Except as noted on the Perfection Certificates, neither Borrower nor any of its Subsidiaries is a party to, nor isbound by, any material license or other material agreement with respect to which Borrower or such Subsidiary is the licensee that (i) prohibits or otherwiserestricts Borrower or its Subsidiaries from granting a security interest in Borrower’s or such Subsidiaries’ interest in such material license or materialagreement or any other property, or (ii) for which a default under or termination of could interfere with Collateral Agent’s or any Lender’s right to sell anyCollateral. Borrower shall provide written notice to Collateral Agent and each Lender within twenty (20) days of Borrower or any of its Subsidiaries enteringinto or becoming bound by any license or agreement with respect to which Borrower or any Subsidiary is the licensee (other than over-the-counter softwarethat is commercially available to the public).5.3Litigation. Except as disclosed (i) on the Perfection Certificates, or (ii) in accordance with Section 6.9 hereof, there are no actions, suits,investigations, or proceedings pending or, to the knowledge of the Responsible Officers, threatened in writing by or against Borrower or any of itsSubsidiaries involving more than Two Hundred Fifty Thousand Dollars ($250,000.00).5.4No Material Deterioration in Financial Condition; Financial Statements. All consolidated financial statements for Borrower and itsSubsidiaries, delivered to Collateral Agent fairly present, in conformity with GAAP, in all material respects the consolidated financial condition of Borrowerand its Subsidiaries, and the consolidated results of operations of Borrower and its Subsidiaries as of the dates and for WEST\274507290.5 368986-0001357  the periods presented. Lender understands that interim financial statements may not be audited and may be subject to ordinary course year-end adjustments,such as for the sake of example only, changes in the fair market value of warrants. Lender therefore understands and agrees that such financial statements aretherefore considered to be in draft form and subject to adjustment. There has not been any material deterioration in the consolidated financial condition ofBorrower and its Subsidiaries since the date of the most recent financial statements submitted to any Lender.5.5Solvency. Borrower is solvent and each of its Subsidiaries, on a consolidated basis, is Solvent.5.6Regulatory Compliance. Neither Borrower nor any of its Subsidiaries is an “investment company” or a company “controlled” by an“investment company” under the Investment Company Act of 1940, as amended. Neither Borrower nor any of its Subsidiaries is engaged as one of itsimportant activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower and each of itsSubsidiaries has complied in all material respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a “holdingcompany” or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company” as each term is defined and used in the Public UtilityHolding Company Act of 2005. Neither Borrower nor any of its Subsidiaries has violated any laws, ordinances or rules, the violation of which couldreasonably be expected to have a Material Adverse Change. Neither Borrower’s nor any of its Subsidiaries’ properties or assets has been used by Borrower orsuch Subsidiary or, to Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance otherthan in material compliance with applicable laws. Borrower and each of its Subsidiaries has obtained all consents, approvals and authorizations of, made alldeclarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currentlyconducted.None of Borrower, any of its Subsidiaries, or any of Borrower’s or its Subsidiaries’ Affiliates or any of their respective agents acting or benefiting inany capacity in connection with the transactions contemplated by this Agreement is (i) in violation of any Anti-Terrorism Law, (ii) engaging in or conspiringto engage in any transaction that evades or avoids, or has the purpose of evading or avoiding or attempts to violate, any of the prohibitions set forth in anyAnti-Terrorism Law, or (iii) is a Blocked Person. None of Borrower, any of its Subsidiaries, or to the knowledge of Borrower and any of their Affiliates oragents, acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement, (x) conducts any business or engages inmaking or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (y) deals in, or otherwise engages in anytransaction relating to, any property or interest in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law.5.7Investments. Neither Borrower nor any of its Subsidiaries owns any stock, shares, partnership interests or other equity securities exceptfor Permitted Investments.5.8Tax Returns and Payments; Pension Contributions. Borrower and each of its Subsidiaries has timely filed or filed extensions for allrequired tax returns and reports, and Borrower and each of its Subsidiaries, has timely paid or filed extensions for all foreign, federal, state, and local taxes,assessments, deposits and contributions owed by Borrower and such Subsidiaries, in all jurisdictions in which Borrower or any such Subsidiary is subject totaxes, including the United States, unless such taxes are being contested in accordance with the following sentence. Borrower and each of its Subsidiaries,may defer payment of any contested taxes, provided that Borrower or such Subsidiary, (a) in good faith contests its obligation to pay the taxes by appropriateproceedings promptly and diligently instituted and conducted, (b) notifies Collateral Agent in writing of the commencement of, and any materialdevelopment in, the proceedings, and (c) posts bonds or takes any other steps required to prevent the Governmental Authority levying such contested taxesfrom obtaining a Lien upon any of the Collateral that is other than a “Permitted Lien.” Neither Borrower nor any of its Subsidiaries is aware of any claims oradjustments proposed in writing for any of Borrower’s or such Subsidiaries’, prior tax years which could result in additional taxes becoming due and payableby Borrower or its Subsidiaries. Borrower and each of its Subsidiaries have paid all amounts necessary to fund all present pension, profit sharing and deferredcompensation plans in accordance with their terms, and neither Borrower nor any of its Subsidiaries have, withdrawn from participation in, and have notpermitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably beexpected to result in any liability of Borrower or its Subsidiaries, including any liability to the Pension Benefit Guaranty Corporation or its successors or anyother Governmental Authority. WEST\274507290.5 368986-0001358  5.9Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions solely as working capital and to fund its general businessrequirements in accordance with the provisions of this Agreement, and not for personal, family, household or agricultural purposes.5.10Shares. Borrower has full power and authority to create a first lien on the Shares and no disability or contractual obligation exists thatwould prohibit Borrower from pledging the Shares pursuant to this Agreement. To Borrower’s knowledge, there are no subscriptions, warrants, rights of firstrefusal or other restrictions on transfer relative to, or options exercisable with respect to the Shares. The Shares have been and will be duly authorized andvalidly issued, and are fully paid and non-assessable. To Borrower’s knowledge, the Shares are not the subject of any present or threatened suit, action,arbitration, administrative or other proceeding, and Borrower knows of no reasonable grounds for the institution of any such proceedings.5.11Full Disclosure. No written representation, warranty or other statement of Borrower or any of its Subsidiaries in any certificate orwritten statement given to Collateral Agent or any Lender, as of the date such representation, warranty, or other statement was made, taken together with allsuch written certificates and written statements given to Collateral Agent or any Lender, contains any untrue statement of a material fact or omits to state amaterial fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized that the projections andforecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period orperiods covered by such projections and forecasts may differ from the projected or forecasted results).5.12Definition of “Knowledge.” For purposes of the Loan Documents, whenever a representation or warranty is made to Borrower’sknowledge or awareness, to the “best of” Borrower’s knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, afterreasonable investigation, of the Responsible Officers.6.AFFIRMATIVE COVENANTSBorrower shall, and shall cause each of its Subsidiaries to, do all of the following:6.1Government Compliance.(a)Maintain its and all its Subsidiaries’ legal existence and good standing in their respective jurisdictions of organization andmaintain qualification in each jurisdiction in which the failure to so qualify could reasonably be expected to have a Material Adverse Change. Comply withall laws, ordinances and regulations to which Borrower or any of its Subsidiaries is subject, the noncompliance with which could reasonably be expected tohave a Material Adverse Change.(b)Obtain and keep in full force and effect, all of the material Governmental Approvals necessary for the performance by Borrowerand its Subsidiaries of their respective businesses and obligations under the Loan Documents and the grant of a security interest to Collateral Agent for theratable benefit of the Lenders, in all of the Collateral. Borrower shall promptly provide copies to Collateral Agent of any material Governmental Approvalsobtained by Borrower or any of its Subsidiaries.6.2Financial Statements, Reports, Certificates.(a)Deliver to each Lender:(i)as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidatedand consolidating balance sheet, income statement and cash flow statement covering the consolidated operations of Borrower and its Subsidiaries for suchmonth certified by a Responsible Officer and in a form reasonably acceptable to Collateral Agent;(ii)as soon as available, but no later than one hundred twenty (120) days after the last day of Borrower’s fiscal year orwithin five (5) days of filing with the SEC, audited consolidated financial statements prepared under GAAP, consistently applied, together with anunqualified opinion on the financial statements from an independent certified public accounting firm acceptable to Collateral Agent in its reasonablediscretion; WEST\274507290.5 368986-0001359  (iii)as soon as available after approval thereof by Borrower’s Board of Directors, but no later than thirty (30) days after thelast day of each of Borrower’s fiscal years, Borrower’s annual financial projections for the entire current fiscal year as approved by Borrower’s Board ofDirectors, which such annual financial projections shall be set forth in a quarterly format (such annual financial projections as originally delivered toCollateral Agent and the Lenders are referred to herein as the “Annual Projections”; provided that, any revisions of the Annual Projections approved byBorrower’s Board of Directors shall be delivered to Collateral Agent and the Lenders no later than ten (10) days after such approval);(iv)within five (5) days of delivery, copies of all statements, reports and notices made available to Borrower’s securityholders or holders of Subordinated Debt;(v)within five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed with the Securities and ExchangeCommission,(vi)prompt notice of any amendments of or other material changes to the capitalization table of Borrower and to theOperating Documents of Borrower or any of its Subsidiaries, together with any copies reflecting such amendments or changes with respect thereto;(vii)prompt notice of any event that could reasonably be expected to materially and adversely affect the value of theIntellectual Property;(viii)as soon as available, but no later than thirty (30) days after the last day of each month, copies of the month-endaccount statements for each Collateral Account maintained by Borrower or its Subsidiaries, which statements may be provided to Collateral Agent and eachLender by Borrower or directly from the applicable institution(s), and(ix)other information as reasonably requested by Collateral Agent or any Lender.Notwithstanding the foregoing, documents required to be delivered pursuant to the terms hereof (to the extent any such documents are included in materialsotherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which Borrowerposts such documents, or provides a link thereto, on Borrower’s website on the internet at Borrower’s website address.(b)Concurrently with the delivery of the financial statements specified in Section 6.2(a)(i) above but no later than thirty (30) daysafter the last day of each month, deliver to each Lender, a duly completed Compliance Certificate signed by a Responsible Officer.(c)Keep proper books of record and account in accordance with GAAP in all material respects, in which full, true and correct entriesshall be made of all dealings and transactions in relation to its business and activities. Borrower shall, and shall cause each of its Subsidiaries to, allow, at thesole reasonable cost of Borrower, Collateral Agent or any Lender, during regular business hours upon reasonable prior notice (provided that no notice shallbe required when an Event of Default has occurred and is continuing), to visit and inspect any of its properties, to examine and make abstracts or copies fromany of its books and records, and to conduct a collateral audit and analysis of its operations and the Collateral. Such audits shall be conducted no more oftenthan once every year unless (and more frequently if) an Event of Default has occurred and is continuing.6.3Inventory; Returns. Keep all Inventory in good and marketable condition, free from material defects. Returns and allowances betweenBorrower, or any of its Subsidiaries, and their respective Account Debtors shall follow Borrower’s, or such Subsidiary’s, customary practices as they exist atthe Effective Date. Borrower must promptly notify Collateral Agent and the Lenders of all returns, recoveries, disputes and claims that involve more than TwoHundred Fifty Thousand Dollars ($250,000.00) individually or in the aggregate in any calendar year.6.4Taxes; Pensions. Timely file and require each of its Subsidiaries to timely file, all required tax returns and reports or extensions therefor(which are timely filed and accepted and approved by the applicable Governmental Authority) and timely pay, and require each of its Subsidiaries to timelyfile, all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by Borrower or its Subsidiaries, except for deferred payment ofany taxes contested pursuant to the terms of Section 5.8 hereof, and shall deliver to Lenders, on demand, appropriate certificates attesting to such payments,and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with the terms of such plans. WEST\274507290.5 368986-00013510  6.5Insurance. Keep Borrower’s and its Subsidiaries’ business and the Collateral insured for risks and in amounts standard for companies inBorrower’s and its Subsidiaries’ industry and location and as Collateral Agent may reasonably request. Insurance policies shall be in a form, with companies,and in amounts that are reasonably satisfactory to Collateral Agent and Lenders. All property policies shall have a lender’s loss payable endorsementshowing Collateral Agent as lender loss payee and waive subrogation against Collateral Agent, and all liability policies shall show, or have endorsementsshowing, Collateral Agent, as additional insured. The Collateral Agent shall be named as lender loss payee and/or additional insured with respect to any suchinsurance providing coverage in respect of any Collateral, and each provider of any such insurance shall agree, by endorsement upon the policy or policiesissued by it or by independent instruments furnished to the Collateral Agent, that it will give the Collateral Agent thirty (30) days prior written notice beforeany such policy or policies shall be materially altered or canceled. At Collateral Agent’s request, Borrower shall deliver certified copies of policies andevidence of all premium payments. Proceeds payable under any policy shall, at Collateral Agent’s option, be payable to Collateral Agent, for the ratablebenefit of the Lenders, on account of the Obligations. Notwithstanding the foregoing, (a) so long as no Event of Default has occurred and is continuing,Borrower shall have the option of applying the proceeds of any casualty policy up to One Hundred Thousand Dollars ($100,000.00) with respect to any loss,but not exceeding One Hundred Thousand Dollars ($100,000.00), in the aggregate for all losses under all casualty policies in any one year, toward thereplacement or repair of destroyed or damaged property; provided that any such replaced or repaired property (i) shall be of equal or like value as the replacedor repaired Collateral and (ii) shall be deemed Collateral in which Collateral Agent has been granted a first priority security interest, and (b) after theoccurrence and during the continuance of an Event of Default, all proceeds payable under such casualty policy shall, at the option of Collateral Agent, bepayable to Collateral Agent, for the ratable benefit of the Lenders, on account of the Obligations. If Borrower or any of its Subsidiaries fails to obtaininsurance as required under this Section 6.5 or to pay any amount or furnish any required proof of payment to third persons, Collateral Agent and/or anyLender may make, at Borrower’s expense, all or part of such payment or obtain such insurance policies required in this Section 6.5, and take any action underthe policies Collateral Agent or such Lender deems prudent.6.6Operating Accounts.(a)Maintain all of Borrower’s and its Subsidiaries’ Collateral Accounts in accounts which are subject to a Control Agreement infavor of Collateral Agent; provided, however, that Borrower may maintain an account with Square 1 Bank, a division of Pacific Western Bank, which is notsubject to a Control Agreement so long as such account (i) is closed no later than ninety (90) days from the Effective Date and (ii) holds no more thanTwenty-Five Thousand Dollars ($25,000) in cash and Cash Equivalents at any time.(b)Borrower shall provide Collateral Agent five (5) days’ prior written notice before Borrower or any of its Subsidiaries establishesany Collateral Account at or with any Person other than the institutions identified to Collateral Agent in the Perfection Certificate delivered by Borrower asof the Effective Date. In addition, for each Collateral Account that Borrower or any of its Subsidiaries, at any time maintains, Borrower or such Subsidiaryshall cause the applicable bank or financial institution at or with which such Collateral Account is maintained to execute and deliver a Control Agreement orother appropriate instrument with respect to such Collateral Account to perfect Collateral Agent’s Lien in such Collateral Account in accordance with theterms hereunder prior to the establishment of such Collateral Account, which Control Agreement may not be terminated without prior written consent ofCollateral Agent. The provisions of the previous sentence shall not apply to deposit accounts exclusively used for payroll, payroll taxes and other employeewage and benefit payments to or for the benefit of Borrower’s, or any of its Subsidiaries’, employees and identified to Collateral Agent by Borrower as such inthe Perfection Certificates. Collateral Agent agrees not to place a “hold” or deliver a notice of exclusive control, entitlement order, or other similar directionsor instructions under any Control Agreement or similar agreements providing control of any Collateral unless an Event of Default has occurred.(c)Neither Borrower nor any of its Subsidiaries shall maintain any Collateral Accounts except Collateral Accounts maintained inaccordance with Sections 6.6(a) and (b). WEST\274507290.5 368986-00013511  6.7Protection of Intellectual Property Rights. Borrower and each of its Subsidiaries shall: (a) use commercially reasonable efforts toprotect, defend and maintain the validity and enforceability of its Intellectual Property that is material to Borrower’s business; (b) promptly advise CollateralAgent in writing of material infringement by a third party of its Intellectual Property; and (c) not allow any Intellectual Property material to Borrower’sbusiness to be abandoned, forfeited or dedicated to the public without Collateral Agent’s prior written consent.6.8Litigation Cooperation. Commencing on the Effective Date and continuing through the termination of this Agreement, make availableto Collateral Agent and the Lenders, without expense to Collateral Agent or the Lenders, Borrower and each of Borrower’s officers, employees and agents andBorrower’s Books, to the extent that Collateral Agent or any Lender may reasonably deem them necessary to prosecute or defend any third-party suit orproceeding instituted by or against Collateral Agent or any Lender with respect to any Collateral or relating to Borrower.6.9Notices of Litigation and Default. Borrower will give prompt written notice to Collateral Agent and the Lenders of any litigation orgovernmental proceedings pending or threatened (in writing) against Borrower or any of its Subsidiaries, which could reasonably be expected to result indamages or costs to Borrower or any of its Subsidiaries of Two Hundred Fifty Thousand Dollars ($250,000.00) or more or which could reasonably beexpected to have a Material Adverse Change. Without limiting or contradicting any other more specific provision of this Agreement, promptly (and in anyevent within three (3) Business Days) upon Borrower becoming aware of the existence of any Event of Default or event which, with the giving of notice orpassage of time, or both, would constitute an Event of Default, Borrower shall give written notice to Collateral Agent and the Lenders of such occurrence,which such notice shall include a reasonably detailed description of such Event of Default or event which, with the giving of notice or passage of time, orboth, would constitute an Event of Default.6.10[Intentionally Omitted.]6.11Landlord Waivers; Bailee Waivers. In the event that Borrower or any of its Subsidiaries, after the Effective Date, intends to add anynew offices or business locations, including warehouses, or otherwise store any portion of the Collateral with, or deliver any portion of the Collateral to, abailee, in each case pursuant to Section 7.2, then Borrower or such Subsidiary will provide written notice thereof to Collateral Agent and, in the event that thenew location is the chief executive office of the Borrower or such Subsidiary or the Collateral at any such new location is valued in excess of Two HundredFifty Thousand ($250,000.00) in the aggregate, such bailee or landlord, as applicable, must execute and deliver a bailee waiver or landlord waiver, asapplicable, in form and substance reasonably satisfactory to Collateral Agent prior to the addition of any new offices or business locations, or any suchstorage with or delivery to any such bailee, as the case may be.6.12Creation/Acquisition of Subsidiaries. In the event Borrower, or any of its Subsidiaries creates or acquires any Subsidiary, Borrowershall provide prior written notice to Collateral Agent and each Lender of the creation or acquisition of such new Subsidiary and take all such action as maybe reasonably required by Collateral Agent or any Lender to cause each such Subsidiary to become a co-Borrower hereunder or to guarantee the Obligationsof Borrower under the Loan Documents and, in each case, grant a continuing pledge and security interest in and to the assets of such Subsidiary (substantiallyas described on Exhibit A hereto); and Borrower (or its Subsidiary, as applicable) shall grant and pledge to Collateral Agent, for the ratable benefit of theLenders, a perfected security interest in the Shares of each such newly created Subsidiary.6.13Further Assurances.(a)Execute any further instruments and take further action as Collateral Agent or any Lender reasonably requests to perfect orcontinue Collateral Agent’s Lien in the Collateral or to effect the purposes of this Agreement.(b)Deliver to Collateral Agent and Lenders, within five (5) days after the same are sent or received, copies of all materialcorrespondence, reports, documents and other filings with any Governmental Authority that could reasonably be expected to have a material adverse effecton any of the Governmental Approvals material to Borrower’s business or otherwise could reasonably be expected to have a Material Adverse Change. WEST\274507290.5 368986-00013512  7.NEGATIVE COVENANTSBorrower shall not, and shall not permit any of its Subsidiaries to, do any of the following without the prior written consent of the Required Lenders:7.1Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, “Transfer”), or permit any of its Subsidiaries toTransfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn out, surplus or obsoleteEquipment; and (c) in connection with Permitted Liens, Permitted Investments and Permitted Licenses; and (d) in addition to those specifically enumeratedabove, expenditures reflected in the Annual Projections, as such Annual Projections may be amended from time to time pursuant to the terms of Section 6.2hereof.7.2Changes in Business, Management, Ownership, or Business Locations. (a) Engage in or permit any of its Subsidiaries to engage in anybusiness other than the businesses engaged in by Borrower as of the Effective Date or reasonably related thereto; (b) liquidate or dissolve; or (c) (i) any KeyPerson shall cease to be actively engaged in the management of Borrower unless written notice thereof is provided to Collateral Agent within five (5) days ofsuch change, or (ii) enter into any transaction or series of related transactions in which the stockholders of Borrower who were not stockholders immediatelyprior to the first such transaction own more than forty nine percent (49%) of the voting stock of Borrower immediately after giving effect to such transactionor related series of such transactions (other than by the sale of Borrower’s equity securities in a public offering, a private placement of public equity or toventure capital investors so long as Borrower identifies to Collateral Agent the venture capital investors prior to the closing of the transaction). Borrowershall not, without at least thirty (30) days’ prior written notice to Collateral Agent: (A) add any new offices or business locations, including warehouses(unless such new offices or business locations (ii) contain less than One Hundred Thousand Dollars ($100,000.00) in assets or property of Borrower or any ofits Subsidiaries and (ii) are not Borrower’s or its Subsidiaries’ chief executive office); (B) change its jurisdiction of organization, (C) change its organizationalstructure or type, (D) change its legal name, or (E) change any organizational number (if any) assigned by its jurisdiction of organization.7.3Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, oracquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock, shares or property of another Person other than pursuant to aPermitted Acquisition. A Subsidiary (including each of EB Pharma and EBPI) may merge or consolidate into another Subsidiary (provided such survivingSubsidiary is a “co-Borrower” hereunder or has provided a secured Guaranty of Borrower’s Obligations hereunder) or with (or into) Borrower providedBorrower is the surviving legal entity, and as long as no Event of Default is occurring prior thereto or arises as a result therefrom. Without limiting theforegoing, Borrower shall not, without Collateral Agent’s prior written consent, enter into any binding contractual arrangement with any Person to attempt tofacilitate a merger or acquisition of Borrower, unless (i) no Event of Default exists when such agreement is entered into by Borrower, (ii) such agreement doesnot give such Person the right to claim any fees, payments or damages from Borrower in excess of Two Hundred Fifty Thousand Dollars ($250,000.00), and(iii) Borrower notifies Collateral Agent in advance of entering into such an agreement.7.4Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than PermittedIndebtedness.7.5Encumbrance. Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, includingthe sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral not to be subject to the first prioritysecurity interest granted herein (except for Permitted Liens that are permitted by the terms of this Agreement to have priority over Collateral Agent’s Lien), orenter into any agreement, document, instrument or other arrangement (except with or in favor of Collateral Agent, for the ratable benefit of the Lenders) withany Person which directly or indirectly prohibits or has the effect of prohibiting Borrower, or any of its Subsidiaries, from assigning, mortgaging, pledging,granting a security interest in or upon, or encumbering any of Borrower’s or such Subsidiary’s Intellectual Property, except as is otherwise permitted inSection 7.1 hereof and the definition of “Permitted Liens” herein.7.6Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms of Section 6.6 hereof. WEST\274507290.5 368986-00013513  7.7Distributions; Investments. (a) Pay any dividends (other than dividends payable solely in capital stock) or make any distribution orpayment in respect of or redeem, retire or purchase any capital stock (other than repurchases pursuant to the terms of employee stock purchase plans,employee restricted stock agreements, stockholder rights plans, director or consultant stock option plans, or similar plans, provided such repurchases do notexceed Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate per fiscal year) or (b) directly or indirectly make any Investment other thanPermitted Investments, or permit any of its Subsidiaries to do so.7.8Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower orany of its Subsidiaries, except for (a) transactions that are in the ordinary course of Borrower’s or such Subsidiary’s business, upon fair and reasonable termsthat are no less favorable to Borrower or such Subsidiary than would be obtained in an arm’s length transaction with a non-affiliated Person, (b) SubordinatedDebt or equity investments by Borrower’s investors in Borrower or its Subsidiaries, (c) any transaction contemplated in Section 7.1, (d) compensation andindemnification of, and other employment arrangements with, directors, officers and employees of Borrower or any Subsidiary, in each case, entered into inthe ordinary course of business in accordance with Borrower’s Annual Projections and corporate governance practices, and (e) loans and advances otherwiseexplicitly permitted hereunder to be made to the applicable Affiliate.7.9Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination,intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to theSubordinated Debt which would increase the maximum amount thereof or adversely affect the subordination thereof to Obligations owed to the Lenders.7.10Compliance. Become an “investment company” or a company controlled by an “investment company”, under the InvestmentCompany Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined inRegulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet theminimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with theFederal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a Material Adverse Change, orpermit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, orpermit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably beexpected to result in any liability of Borrower or any of its Subsidiaries, including any liability to the Pension Benefit Guaranty Corporation or its successorsor any other Governmental Authority.7.11Compliance with Anti-Terrorism Laws. Collateral Agent hereby notifies Borrower and each of its Subsidiaries that pursuant to therequirements of Anti-Terrorism Laws, and Collateral Agent’s policies and practices, Collateral Agent is required to obtain, verify and record certaininformation and documentation that identifies Borrower and each of its Subsidiaries and their principals, which information includes the name and address ofBorrower and each of its Subsidiaries and their principals and such other information that will allow Collateral Agent to identify such party in accordancewith Anti-Terrorism Laws. Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of its Subsidiaries permit any Affiliate to, directly orindirectly, knowingly enter into any documents, instruments, agreements or contracts with any Person listed on the OFAC Lists. Borrower and each of itsSubsidiaries shall immediately notify Collateral Agent if Borrower or such Subsidiary has knowledge that Borrower, or any Subsidiary or Affiliate ofBorrower, is listed on the OFAC Lists or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is arraigned and held over on chargesinvolving money laundering or predicate crimes to money laundering. Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of itsSubsidiaries, permit any Affiliate to, directly or indirectly, (i) conduct any business or engage in any transaction or dealing with any Blocked Person,including, without limitation, the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked Person, (ii) deal in,or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224 or any similarexecutive order or other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading oravoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or other Anti-Terrorism Law. WEST\274507290.5 368986-00013514  8.EVENTS OF DEFAULTAny one of the following shall constitute an event of default (an “Event of Default”) under this Agreement:8.1Payment Default. Borrower fails to (a) make any payment of principal or interest on any Credit Extension on its due date, or (b) pay anyother Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business Day grace period shall not apply topayments due on the Maturity Date or the date of acceleration pursuant to Section 9.1 (a) hereof). During the cure period, the failure to cure the paymentdefault is not an Event of Default (but no Credit Extension will be made during the cure period);8.2Covenant Default.(a)Borrower or any of its Subsidiaries fails or neglects to perform any obligation in Sections 6.2 (Financial Statements, Reports,Certificates), 6.4 (Taxes), 6.5 (Insurance), 6.6 (Operating Accounts), 6.7 (Protection of Intellectual Property Rights), 6.9 (Notice of Litigation and Default),6.11 (Landlord Waivers; Bailee Waivers), 6.12 (Creation/Acquisition of Subsidiaries) or 6.13 (Further Assurances) or Borrower violates any covenant inSection 7; or(b)Borrower, or any of its Subsidiaries, fails or neglects to perform, keep, or observe any other term, provision, condition, covenantor agreement contained in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term,provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided,however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten(10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any caseexceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event ofDefault (but no Credit Extensions shall be made during such cure period). Grace periods provided under this Section shall not apply, among other things, tofinancial covenants or any other covenants, if any, set forth in subsection (a) above;8.3Material Adverse Change. A Material Adverse Change occurs;8.4Attachment; Levy; Restraint on Business.(a)(i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or any of its Subsidiaries or ofany entity under control of Borrower or its Subsidiaries on deposit with any Lender or any Lender’s Affiliate or any bank or other institution at whichBorrower or any of its Subsidiaries maintains a Collateral Account, or (ii) a notice of lien, levy, or assessment is filed against Borrower or any of itsSubsidiaries or their respective assets by any government agency, and the same under subclauses (i) and (ii) hereof are not, within ten (10) days after theoccurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made duringany ten (10) day cure period; and(b)(i) any material portion of Borrower’s or any of its Subsidiaries’ assets is attached, seized, levied on, or comes into possession ofa trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower or any of its Subsidiaries from conducting any part of its business;8.5Insolvency. (a) Borrower or any of its Subsidiaries is or becomes Insolvent; (b) Borrower or any of its Subsidiaries begins an InsolvencyProceeding; or (c) an Insolvency Proceeding is begun against Borrower or any of its Subsidiaries and not dismissed or stayed within forty-five (45) days (butno Credit Extensions shall be made while Borrower or any Subsidiary is Insolvent and/or until any Insolvency Proceeding is dismissed);8.6Other Agreements. There is a default in any agreement to which Borrower or any of its Subsidiaries is a party with a third party or partiesresulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of TwoHundred Fifty Thousand Dollars ($250,000.00) or that could reasonably be expected to have a Material Adverse Change; WEST\274507290.5 368986-00013515  8.7Judgments. One or more judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of atleast Two Hundred Fifty Thousand Dollars ($250,000.00) (not covered by independent third-party insurance as to which liability has been accepted by suchinsurance carrier) shall be rendered against Borrower or any of its Subsidiaries and shall remain unsatisfied, unvacated, or unstayed for a period of ten (10)days after the entry thereof (provided that no Credit Extensions will be made prior to the satisfaction, vacation, or stay of such judgment, order or decree);8.8Misrepresentations. Borrower or any of its Subsidiaries or any Person acting for Borrower or any of its Subsidiaries makes anyrepresentation, warranty, or other statement now or later in this Agreement, any Loan Document or in any writing delivered to Collateral Agent and/orLenders or to induce Collateral Agent and/or the Lenders to enter this Agreement or any Loan Document, and such representation, warranty, or otherstatement is incorrect in any material respect when made;8.9Subordinated Debt. A default or breach occurs under any agreement between Borrower or any of its Subsidiaries and any creditor ofBorrower or any of its Subsidiaries that signed a subordination, intercreditor, or other similar agreement with Collateral Agent or the Lenders, or any creditorthat has signed such an agreement with Collateral Agent or the Lenders breaches any terms of such agreement;8.10Guaranty. (a) Any Guaranty terminates or ceases for any reason to be in full force and effect; (b) any Guarantor does not perform anyobligation or covenant under any Guaranty; (c) any circumstance described in Sections 8.3, 8.4, 8.5, 8.7, or 8.8 occurs with respect to any Guarantor, or (d)the death, liquidation, winding up, or termination of existence of any Guarantor;8.11Governmental Approvals. Any Governmental Approval shall have been revoked, rescinded, suspended, modified in an adversemanner, or not renewed in the ordinary course for a full term and such revocation, rescission, suspension, modification or non-renewal has resulted in or couldreasonably be expected to result in a Material Adverse Change; or8.12Lien Priority. Any Lien created hereunder or by any other Loan Document shall at any time fail to constitute a valid and perfectedLien on any of the Collateral purported to be secured thereby, subject to no prior or equal Lien, other than Permitted Liens which are permitted to havepriority in accordance with the terms of this Agreement.8.13Delisting. The shares of common stock of Borrower are delisted from NASDAQ Capital Market because of failure to comply withcontinued listing standards thereof or due to a voluntary delisting which results in such shares not being listed on any other nationally recognized stockexchange in the United States having listing standards at least as restrictive as the NASDAQ Capital Market.9.RIGHTS AND REMEDIES9.1Rights and Remedies.(a)Upon the occurrence and during the continuance of an Event of Default, Collateral Agent may, and at the written direction ofRequired Lenders shall, without notice or demand, do any or all of the following: (i) deliver notice of the Event of Default to Borrower, (ii) by notice toBorrower declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations shall beimmediately due and payable without any action by Collateral Agent or the Lenders) or (iii) by notice to Borrower suspend or terminate the obligations, ifany, of the Lenders to advance money or extend credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower andCollateral Agent and/or the Lenders (but if an Event of Default described in Section 8.5 occurs all obligations, if any, of the Lenders to advance money orextend credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Collateral Agent and/or the Lenders shall beimmediately terminated without any action by Collateral Agent or the Lenders). WEST\274507290.5 368986-00013516  (b)Without limiting the rights of Collateral Agent and the Lenders set forth in Section 9.1(a) above, upon the occurrence and duringthe continuance of an Event of Default, Collateral Agent shall have the right at the written direction of the Required Lenders, without notice or demand, to doany or all of the following:(i)foreclose upon and/or sell or otherwise liquidate, the Collateral;(ii)apply to the Obligations any (a) balances and deposits of Borrower that Collateral Agent or any Lender holds orcontrols, or (b) any amount held or controlled by Collateral Agent or any Lender owing to or for the credit or the account of Borrower; and/or(iii)commence and prosecute an Insolvency Proceeding or consent to Borrower commencing any Insolvency Proceeding.(c)Without limiting the rights of Collateral Agent and the Lenders set forth in Sections 9.1(a) and (b) above, upon the occurrenceand during the continuance of an Event of Default, Collateral Agent shall have the right, without notice or demand, to do any or all of the following:(i)settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that CollateralAgent considers advisable, notify any Person owing Borrower money of Collateral Agent’s security interest in such funds, and verify the amount of suchaccount;(ii)make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its securityinterest in the Collateral. Borrower shall assemble the Collateral if Collateral Agent requests and make it available in a location as Collateral Agentreasonably designates. Collateral Agent may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, andpay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grantsCollateral Agent a license to enter and occupy any of its premises, without charge, to exercise any of Collateral Agent’s rights or remedies;(iii)ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, and/or advertise for sale, the Collateral. CollateralAgent is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s and each of its Subsidiaries’ labels, patents,copyrights, mask works, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any similar property as itpertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Collateral Agent’s exercise ofits rights under this Section 9.1, Borrower’s and each of its Subsidiaries’ rights under all licenses and all franchise agreements inure to Collateral Agent, forthe benefit of the Lenders;(iv)place a “hold” on any account maintained with Collateral Agent or the Lenders and/or deliver a notice of exclusivecontrol, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of anyCollateral;(v)demand and receive possession of Borrower’s Books;(vi)appoint a receiver to seize, manage and realize any of the Collateral, and such receiver shall have any right andauthority as any competent court will grant or authorize in accordance with any applicable law, including any power or authority to manage the business ofBorrower or any of its Subsidiaries; and(vii)subject to clauses 9.1(a) and (b), exercise all rights and remedies available to Collateral Agent and each Lender underthe Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof). WEST\274507290.5 368986-00013517  Notwithstanding any provision of this Section 9.1 to the contrary, upon the occurrence of any Event of Default, Collateral Agent shall have the right toexercise any and all remedies referenced in this Section 9.1 without the written consent of Required Lenders following the occurrence of an ExigentCircumstance. As used in the immediately preceding sentence, “Exigent Circumstance” means any event or circumstance that, in the reasonable judgment ofCollateral Agent, imminently threatens the ability of Collateral Agent to realize upon all or any material portion of the Collateral, such as, without limitation,fraudulent removal, concealment, or abscondment thereof, destruction or material waste thereof, or failure of Borrower or any of its Subsidiaries afterreasonable demand to maintain or reinstate adequate casualty insurance coverage, or which, in the judgment of Collateral Agent, could reasonably beexpected to result in a material diminution in value of the Collateral.9.2Power of Attorney. Borrower hereby irrevocably appoints Collateral Agent as its lawful attorney-in-fact, exercisable upon theoccurrence and during the continuance of an Event of Default, to: (a) endorse Borrower’s or any of its Subsidiaries’ name on any checks or other forms ofpayment or security; (b) sign Borrower’s or any of its Subsidiaries’ name on any invoice or bill of lading for any Account or drafts against Account Debtors;(c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Collateral Agent determines reasonable;(d) make, settle, and adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, andadverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer theCollateral into the name of Collateral Agent or a third party as the Code or any applicable law permits. Borrower hereby appoints Collateral Agent as itslawful attorney-in-fact to sign Borrower’s or any of its Subsidiaries’ name on any documents necessary to perfect or continue the perfection of CollateralAgent’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations (other than inchoate indemnityobligations) have been satisfied in full and Collateral Agent and the Lenders are under no further obligation to make Credit Extensions hereunder. CollateralAgent’s foregoing appointment as Borrower’s or any of its Subsidiaries’ attorney in fact, and all of Collateral Agent’s rights and powers, coupled with aninterest, are irrevocable until all Obligations (other than inchoate indemnity obligations) have been fully repaid and performed and Collateral Agent’s andthe Lenders’ obligation to provide Credit Extensions terminates.9.3Protective Payments. If Borrower or any of its Subsidiaries fail to obtain the insurance called for by Section 6.5 or fails to pay anypremium thereon or fails to pay any other amount which Borrower or any of its Subsidiaries is obligated to pay under this Agreement or any other LoanDocument, Collateral Agent may obtain such insurance or make such payment, and all amounts so paid by Collateral Agent are Lenders’ Expenses andimmediately due and payable, bearing interest at the Default Rate, and secured by the Collateral. Collateral Agent will make reasonable efforts to provideBorrower with notice of Collateral Agent obtaining such insurance or making such payment at the time it is obtained or paid or within a reasonable timethereafter. No such payments by Collateral Agent are deemed an agreement to make similar payments in the future or Collateral Agent’s waiver of any Eventof Default.9.4Application of Payments and Proceeds. Notwithstanding anything to the contrary contained in this Agreement, upon the occurrenceand during the continuance of an Event of Default, (a) Borrower irrevocably waives the right to direct the application of any and all payments at any time ortimes thereafter received by Collateral Agent from or on behalf of Borrower or any of its Subsidiaries of all or any part of the Obligations, and, as betweenBorrower on the one hand and Collateral Agent and Lenders on the other, Collateral Agent shall have the continuing and exclusive right to apply and toreapply any and all payments received against the Obligations in such manner as Collateral Agent may deem advisable notwithstanding any previousapplication by Collateral Agent, and (b) the proceeds of any sale of, or other realization upon all or any part of the Collateral shall be applied: first, to theLenders’ Expenses; second, to accrued and unpaid interest on the Obligations (including any interest which, but for the provisions of the United StatesBankruptcy Code, would have accrued on such amounts); third, to the principal amount of the Obligations outstanding; and fourth, to any otherindebtedness or obligations of Borrower owing to Collateral Agent or any Lender under the Loan Documents. Any balance remaining shall be delivered toBorrower or to whoever may be lawfully entitled to receive such balance or as a court of competent jurisdiction may direct. In carrying out the foregoing, (x)amounts received shall be applied in the numerical order provided until exhausted prior to the application to the next succeeding category, and (y) each ofthe Persons entitled to receive a payment in any particular category shall receive an amount equal to its pro rata share of amounts available to be appliedpursuant thereto for such category. Any reference in this Agreement to an allocation between or sharing by the Lenders of any right, interest or obligation“ratably,” “proportionally” or in similar terms shall refer to Pro Rata Share unless expressly provided otherwise. Collateral Agent, or if applicable, eachLender, shall promptly remit to the other Lenders such sums as may be necessary to ensure the ratable repayment of each Lender’s portion of any Term WEST\274507290.5 368986-00013518  Loan and the ratable distribution of interest, fees and reimbursements paid or made by Borrower. Notwithstanding the foregoing, a Lender receiving ascheduled payment shall not be responsible for determining whether the other Lenders also received their scheduled payment on such date; provided,however, if it is later determined that a Lender received more than its ratable share of scheduled payments made on any date or dates, then such Lender shallremit to Collateral Agent or other Lenders such sums as may be necessary to ensure the ratable payment of such scheduled payments, as instructed byCollateral Agent. If any payment or distribution of any kind or character, whether in cash, properties or securities, shall be received by a Lender in excess ofits ratable share, then the portion of such payment or distribution in excess of such Lender’s ratable share shall be received by such Lender in trust for andshall be promptly paid over to the other Lender for application to the payments of amounts due on the other Lenders’ claims. To the extent any payment forthe account of Borrower is required to be returned as a voidable transfer or otherwise, the Lenders shall contribute to one another as is necessary to ensure thatsuch return of payment is on a pro rata basis. If any Lender shall obtain possession of any Collateral, it shall hold such Collateral for itself and as agent andbailee for Collateral Agent and other Lenders for purposes of perfecting Collateral Agent’s security interest therein.9.5Liability for Collateral. So long as Collateral Agent and the Lenders comply with reasonable banking practices regarding thesafekeeping of the Collateral in the possession or under the control of Collateral Agent and the Lenders, Collateral Agent and the Lenders shall not be liableor responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) anyact or default of any carrier, warehouseman, bailee, or other Person. Subject to the immediately preceding sentence, Borrower bears all risk of loss, damage ordestruction of the Collateral.9.6No Waiver; Remedies Cumulative. Failure by Collateral Agent or any Lender, at any time or times, to require strict performance byBorrower of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Collateral Agent or any Lenderthereafter to demand strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by Collateral Agent andthe Required Lenders and then is only effective for the specific instance and purpose for which it is given. The rights and remedies of Collateral Agent andthe Lenders under this Agreement and the other Loan Documents are cumulative. Collateral Agent and the Lenders have all rights and remedies providedunder the Code, any applicable law, by law, or in equity. The exercise by Collateral Agent or any Lender of one right or remedy is not an election, andCollateral Agent’s or any Lender’s waiver of any Event of Default is not a continuing waiver. Collateral Agent’s or any Lender’s delay in exercising anyremedy is not a waiver, election, or acquiescence.9.7Demand Waiver. Borrower waives, to the fullest extent permitted by law, demand, notice of default or dishonor, notice of payment andnonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments,chattel paper, and guarantees held by Collateral Agent or any Lender on which Borrower or any Subsidiary is liable. WEST\274507290.5 368986-00013519  10.NOTICESAll notices, consents, requests, approvals, demands, or other communication (collectively, “Communication”) by any party to this Agreement or anyother Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three(3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upontransmission, when sent by electronic mail (if an email address is specified herein) or facsimile transmission; (c) one (1) Business Day after deposit with areputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to benotified and sent to the address, facsimile number, or email address indicated below. Any of Collateral Agent, Lender or Borrower may change its mailingaddress or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10. If to Borrower: EIGER BIOPHARMACEUTICALS, INC.350 Cambridge Ave. Suite 350Palo Alto, CA 94306Attn: Chief Financial OfficerFax: (650) 618-1621Email: jwelch@eigerbio.com with a copy (which shall notconstitute notice) to: Cooley LLP3175 Hanover StreetPalo Alto, CA 94304-1130Attn: Glen SatoFax: (650) 849 7400Email: gsato@cooley.com If to Collateral Agent: OXFORD FINANCE LLC133 North Fairfax StreetAlexandria, Virginia 22314Attention: Legal DepartmentFax: (703) 519-5225Email: LegalDepartment@oxfordfinance.com with a copy (which shall notconstitute notice) to: DLA Piper LLP (US)4365 Executive Drive, Suite 1100San Diego, California 92121-2133Attn: Troy ZanderFax: (858) 638-5086Email: troy.zander@dlapiper.com 11.CHOICE OF LAW, VENUE AND JURY TRIAL WAIVERNew York law governs the Loan Documents without regard to principles of conflicts of law. Borrower, Lenders and Collateral Agent each submit to theexclusive jurisdiction of the State and Federal courts in the City of New York, Borough of Manhattan. NOTWITHSTANDING THE FOREGOING,COLLATERAL AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITSPROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH COLLATERAL AGENT AND THE LENDERS (IN ACCORDANCE WITH THEPROVISIONS OF SECTION 9.1) DEEM NECESSARY OR APPROPRIATE TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCECOLLATERAL AGENT’S AND THE LENDERS’ RIGHTS AGAINST BORROWER OR ITS PROPERTY. Borrower expressly submits and consents inadvance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lackof personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemedappropriate by such court. Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agreesthat service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in, orsubsequently provided by Borrower in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier tooccur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, first class, registered or certified mail return receipt requested, properpostage prepaid. WEST\274507290.5 368986-00013520  TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER, COLLATERAL AGENT, AND THE LENDERS EACH WAIVETHEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THELOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHERCLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO THIS AGREEMENT. EACH PARTY HASREVIEWED THIS WAIVER WITH ITS COUNSEL.12.GENERAL PROVISIONS12.1Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrowermay not transfer, pledge or assign this Agreement or any rights or obligations under it without Collateral Agent’s and each Lender’s prior written consent(which may be granted or withheld in Collateral Agent’s and each Lender’s discretion, subject to Section 12.6). The Lenders have the right, without theconsent of or notice to Borrower, to sell, transfer, assign, pledge, negotiate, or grant participation in (any such sale, transfer, assignment, negotiation, or grantof a participation, a “Lender Transfer”) all or any part of, or any interest in, the Lenders’ obligations, rights, and benefits under this Agreement and the otherLoan Documents; provided, however, that any such Lender Transfer (other than a transfer, pledge, sale or assignment to an Eligible Assignee) of itsobligations, rights, and benefits under this Agreement and the other Loan Documents shall require the prior written consent of the Required Lenders (suchapproved assignee, an “Approved Lender”). Borrower and Collateral Agent shall be entitled to continue to deal solely and directly with such Lender inconnection with the interests so assigned until Collateral Agent shall have received and accepted an effective assignment agreement in form satisfactory toCollateral Agent executed, delivered and fully completed by the applicable parties thereto, and shall have received such other information regarding suchEligible Assignee or Approved Lender as Collateral Agent reasonably shall require. Notwithstanding anything to the contrary contained herein, so long as noEvent of Default has occurred and is continuing, no Lender Transfer (other than a Lender Transfer (i) in respect of the Warrants or (ii) in connection with (x)assignments by a Lender due to a forced divestiture at the request of any regulatory agency; or (y) upon the occurrence of a default, event of default or similaroccurrence with respect to a Lender’s own financing or securitization transactions) shall be permitted, without Borrower’s consent, to any Person which is anAffiliate or Subsidiary of Borrower, a direct competitor of Borrower or a vulture hedge fund, each as determined by Collateral Agent in its reasonable goodfaith business discretion.12.2Indemnification. Borrower agrees to indemnify, defend and hold Collateral Agent and the Lenders and their respective directors,officers, employees, agents, attorneys, or any other Person affiliated with or representing Collateral Agent or the Lenders (each, an “Indemnified Person”)harmless against: (a) all obligations, demands, claims, and liabilities (collectively, “Claims”) asserted by any other party in connection with; related to;following; or arising from, out of or under, the transactions contemplated by the Loan Documents; and (b) all losses or Lenders’ Expenses incurred, or paid byIndemnified Person in connection with; related to; following; or arising from, out of or under, the transactions contemplated by the Loan Documents betweenCollateral Agent, and/or the Lenders and Borrower (including reasonable attorneys’ fees and expenses), except for Claims and/or losses directly caused bysuch Indemnified Person’s gross negligence or willful misconduct. Borrower hereby further indemnifies, defends and holds each Indemnified Person harmlessfrom and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of anykind or nature whatsoever (including the fees and disbursements of counsel for such Indemnified Person) in connection with any investigative, response,remedial, administrative or judicial matter or proceeding, whether or not such Indemnified Person shall be designated a party thereto and including any suchproceeding initiated by or on behalf of Borrower, and the reasonable expenses of investigation by engineers, environmental consultants and similar technicalpersonnel and any commission, fee or compensation claimed by any broker (other than any broker retained by Collateral Agent or Lenders) asserting anyright to payment for the transactions contemplated hereby which may be imposed on, incurred by or asserted against such Indemnified Person as a result of orin connection with the transactions contemplated hereby and the use or intended use of the proceeds of the loan proceeds except for liabilities, obligations,losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements directly caused by such Indemnified Person’s grossnegligence or willful misconduct.12.3Time of Essence. Time is of the essence for the performance of all Obligations in this Agreement. WEST\274507290.5 368986-00013521  12.4Severability of Provisions. Each provision of this Agreement is severable from every other provision in determining the enforceabilityof any provision.12.5Correction of Loan Documents. Collateral Agent and the Lenders may correct patent errors and fill in any blanks in this Agreementand the other Loan Documents consistent with the agreement of the parties, so long as Collateral Agent provides Borrower with written notice of suchcorrection and allows the Borrower at least ten (10) days to object to such correction. In the event of such objection, such correction shall not be made exceptby and amendment signed by Lenders, Collateral Agent and Borrower.12.6Amendments in Writing; Integration. (a) No amendment, modification, termination or waiver of any provision of this Agreement orany other Loan Document, no approval or consent thereunder, or any consent to any departure by Borrower or any of its Subsidiaries therefrom, shall in anyevent be effective unless the same shall be in writing and signed by Borrower, Collateral Agent and the Required Lenders provided that:(i)no such amendment, waiver or other modification that would have the effect of increasing or reducing a Lender’s TermLoan Commitment or Commitment Percentage shall be effective as to such Lender without such Lender’s written consent;(ii)no such amendment, waiver or modification that would affect the rights and duties of Collateral Agent shall be effectivewithout Collateral Agent’s written consent or signature;(iii)no such amendment, waiver or other modification shall, unless signed by all the Lenders directly affected thereby, (A)reduce the principal of, rate of interest on or any fees with respect to any Term Loan or forgive any principal, interest (other than default interest) or fees (otherthan late charges) with respect to any Term Loan (B) postpone the date fixed for, or waive, any payment of principal of any Term Loan or of interest on anyTerm Loan (other than default interest) or any fees provided for hereunder (other than late charges or for any termination of any commitment); (C) change thedefinition of the term “Required Lenders” or the percentage of Lenders which shall be required for the Lenders to take any action hereunder; (D) release allor substantially all of any material portion of the Collateral, authorize Borrower to sell or otherwise dispose of all or substantially all or any material portionof the Collateral or release any Guarantor of all or any portion of the Obligations or its guaranty obligations with respect thereto, except, in each case withrespect to this clause (D), as otherwise may be expressly permitted under this Agreement or the other Loan Documents (including in connection with anydisposition permitted hereunder); (E) amend, waive or otherwise modify this Section 12.6 or the definitions of the terms used in this Section 12.6 insofar asthe definitions affect the substance of this Section 12.6; (F) consent to the assignment, delegation or other transfer by Borrower of any of its rights andobligations under any Loan Document or release Borrower of its payment obligations under any Loan Document, except, in each case with respect to thisclause (F), pursuant to a merger or consolidation permitted pursuant to this Agreement; (G) amend any of the provisions of Section 9.4 or amend any of thedefinitions of Pro Rata Share, Term Loan Commitment, Commitment Percentage or that provide for the Lenders to receive their Pro Rata Shares of any fees,payments, setoffs or proceeds of Collateral hereunder; (H) subordinate the Liens granted in favor of Collateral Agent securing the Obligations; or (I) amendany of the provisions of Section 12.10. It is hereby understood and agreed that all Lenders shall be deemed directly affected by an amendment, waiver orother modification of the type described in the preceding clauses (C), (D), (E), (F), (G) and (H) of the preceding sentence;(iv)the provisions of the foregoing clauses (i), (ii) and (iii) are subject to the provisions of any interlender or agencyagreement among the Lenders and Collateral Agent pursuant to which any Lender may agree to give its consent in connection with any amendment, waiveror modification of the Loan Documents only in the event of the unanimous agreement of all Lenders.(b)Other than as expressly provided for in Section 12.6(a)(i)-(iii), Collateral Agent may, if requested by the Required Lenders, fromtime to time designate covenants in this Agreement less restrictive by notification to a representative of Borrower.(c)This Agreement and the Loan Documents represent the entire agreement about this subject matter and supersede priornegotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matterof this Agreement and the Loan Documents merge into this Agreement and the Loan Documents. WEST\274507290.5 368986-00013522  12.7Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, eachof which, when executed and delivered, is an original, and all taken together, constitute one Agreement.12.8Survival. All covenants, representations and warranties made in this Agreement continue in full force and effect until this Agreementhas terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are tosurvive the termination of this Agreement) have been satisfied. The obligation of Borrower in Section 12.2 to indemnify each Lender and Collateral Agent, aswell as the confidentiality provisions in Section 12.9 below, shall survive until the statute of limitations with respect to such claim or cause of action shallhave run.12.9Confidentiality. In handling any confidential information of Borrower, the Lenders and Collateral Agent shall exercise the same degreeof care that it exercises for their own proprietary information, but disclosure of information may be made: (a) subject to the terms and conditions of thisAgreement, to the Lenders’ and Collateral Agent’s Subsidiaries or Affiliates, or in connection with a Lender’s own financing or securitization transactionsand upon the occurrence of a default, event of default or similar occurrence with respect to such financing or securitization transaction; (b) to prospectivetransferees (other than those identified in (a) above) or purchasers of any interest in the Credit Extensions (provided, however, the Lenders and CollateralAgent shall, except upon the occurrence and during the continuance of an Event of Default, obtain such prospective transferee’s or purchaser’s agreement tothe terms of this provision or to similar confidentiality terms); (c) as required by law, regulation, subpoena, or other order; (d) to Lenders’ or CollateralAgent’s regulators or as otherwise required in connection with an examination or audit; (e) as Collateral Agent reasonably considers appropriate in exercisingremedies under the Loan Documents; and (f) to third party service providers of the Lenders and/or Collateral Agent so long as such service providers haveexecuted a confidentiality agreement with the Lenders and Collateral Agent with terms no less restrictive than those contained herein. Confidentialinformation does not include information that either: (i) is in the public domain or in the Lenders’ and/or Collateral Agent’s possession when disclosed to theLenders and/or Collateral Agent, or becomes part of the public domain after disclosure to the Lenders and/or Collateral Agent; or (ii) is disclosed to theLenders and/or Collateral Agent by a third party, if the Lenders and/or Collateral Agent does not know that the third party is prohibited from disclosing theinformation. Collateral Agent and the Lenders may use confidential information for any purpose, including, without limitation, for the development of clientdatabases, reporting purposes, and market analysis, in each case so long as Collateral Agent does not disclose Borrower’s identity or the identity of anyperson associated with Borrower unless otherwise expressly permitted by this Agreement. The provisions of the immediately preceding sentence shall survivethe termination of this Agreement. The agreements provided under this Section 12.9 supersede all prior agreements, understanding, representations,warranties, and negotiations between the parties about the subject matter of this Section 12.9.12.10Right of Set Off. Borrower hereby grants to Collateral Agent and to each Lender, a lien, security interest and right of set off as securityfor all Obligations to Collateral Agent and each Lender hereunder, whether now existing or hereafter arising upon and against all deposits, credits, collateraland property, now or hereafter in the possession, custody, safekeeping or control of Collateral Agent or the Lenders or any entity under the control ofCollateral Agent or the Lenders (including a Collateral Agent affiliate) or in transit to any of them. At any time after the occurrence and during thecontinuance of an Event of Default, without demand or notice, Collateral Agent or the Lenders may set off the same or any part thereof and apply the same toany liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Obligations. ANY ANDALL RIGHTS TO REQUIRE COLLATERAL AGENT TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERALWHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHERPROPERTY OF BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.12.11Cooperation of Borrower. If necessary, Borrower agrees to (i) execute any documents (including new Secured Promissory Notes)reasonably required to effectuate and acknowledge each assignment of a Term Loan Commitment or Loan to an assignee in accordance with Section 12.1(provided such assignment is in accordance with section 12.1), (ii) make Borrower’s management available to meet with Collateral Agent and prospectiveparticipants and assignees of Term Loan Commitments or Credit Extensions (which meetings shall be conducted no more often than twice every twelvemonths unless an Event of Default has occurred and is continuing), and (iii) assist Collateral Agent or the Lenders in the preparation of information relatingto the financial affairs of Borrower as any prospective participant or assignee of a Term Loan Commitment or Term WEST\274507290.5 368986-00013523  Loan reasonably may request in accordance with section 11.1 and subject to Section 11.9. Subject to the provisions of Sections 12.1 and 12.9, Borrowerauthorizes each Lender to disclose to any prospective participant or assignee of a Term Loan Commitment, any and all information in such Lender’spossession concerning Borrower and its financial affairs which has been delivered to such Lender by or on behalf of Borrower pursuant to this Agreement, orwhich has been delivered to such Lender by or on behalf of Borrower in connection with such Lender’s credit evaluation of Borrower prior to entering intothis Agreement.12.12Borrower Liability. Either Borrower may, acting singly, request Credit Extensions hereunder. Each Borrower hereby appoints theother as agent for the other for all purposes hereunder, including with respect to requesting Credit Extensions hereunder. Each Borrower hereunder shall bejointly and severally obligated to repay all Credit Extensions made hereunder, regardless of which Borrower actually receives said Credit Extension, as ifeach Borrower hereunder directly received all Credit Extensions. Each Borrower waives (a) any suretyship defenses available to it under the Code or anyother applicable law, and (b) any right to require Collateral Agent or any Lender to: (i) proceed against any Borrower or any other person; (ii) proceed againstor exhaust any security; or (iii) pursue any other remedy. Collateral Agent and or any Lender may exercise or not exercise any right or remedy it has againstany Borrower or any security it holds (including the right to foreclose by judicial or non-judicial sale) without affecting any Borrower’s liability.Notwithstanding any other provision of this Agreement or other related document, each Borrower irrevocably waives all rights that it may have at law or inequity (including, without limitation, any law subrogating Borrower to the rights of Collateral Agent and the Lenders under this Agreement) to seekcontribution, indemnification or any other form of reimbursement from any other Borrower, or any other Person now or hereafter primarily or secondarilyliable for any of the Obligations, for any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise and allrights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by Borrower with respect to theObligations in connection with this Agreement or otherwise. Any agreement providing for indemnification, reimbursement or any other arrangementprohibited under this Section shall be null and void. If any payment is made to a Borrower in contravention of this Section, such Borrower shall hold suchpayment in trust for Collateral Agent and the Lenders and such payment shall be promptly delivered to Collateral Agent for application to the Obligations,whether matured or unmatured.13.DEFINITIONS13.1Definitions. As used in this Agreement, the following terms have the following meanings:“Account” is any “account” as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, allaccounts receivable and other sums owing to Borrower.“Account Debtor” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.“Affiliate” of any Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is undercommon control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company,that Person’s managers and members.“Agreement” is defined in the preamble hereof.“Amortization Date” is August 1, 2018; provided that, if Borrower draws the Term B Loan, the Amortization Date shall be February 1, 2019.“Annual Projections” is defined in Section 6.2(a).“Anti-Terrorism Laws” are any laws relating to terrorism or money laundering, including Executive Order No. 13224 (effective September 24,2001), the USA PATRIOT Act, the laws comprising or implementing the Bank Secrecy Act, and the laws administered by OFAC. WEST\274507290.5 368986-00013524  “Approved Fund” is any (i) investment company, fund, trust, securitization vehicle or conduit that is (or will be) engaged in making, purchasing,holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business or (ii) any Person (other than anatural person) which temporarily warehouses loans for any Lender or any entity described in the preceding clause (i) and that, with respect to each of thepreceding clauses (i) and (ii), is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) a Person (other than a natural person) or anAffiliate of a Person (other than a natural person) that administers or manages a Lender.“Approved Lender” is defined in Section 12.1.“Basic Rate” is the per annum rate of interest (based on a year of three hundred sixty (360) days) equal to the sum of (a) the greater of (i) thirty (30)day U.S. LIBOR rate reported in The Wall Street Journal on the last Business Day of the month that immediately precedes the month in which the interest willaccrue, or (ii) fifty-four one hundredths percent (0.54%), plus (b) six and forty-one hundredths percent (6.41%). Notwithstanding the foregoing, (x) the BasicRate for the Term Loan for the period from the Effective Date through and including December 31, 2016 shall be seven and three thousand, three hundredsixty-seven hundred-thousandths percent (7.03367%); and (y) the Basic Rate shall not reset below seven and three thousand, three hundred sixty-sevenhundred-thousandths percent (7.03367%).“Blocked Person” is any Person: (a) listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (b) a Personowned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No.13224, (c) a Person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person thatcommits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224, or (e) a Person that is named a “speciallydesignated national” or “blocked person” on the most current list published by OFAC or other similar list.“Borrower” is defined in the preamble hereof.“Borrower’s Books” are Borrower’s or any of its Subsidiaries’ books and records including ledgers, federal, and state tax returns, records regardingBorrower’s or its Subsidiaries’ assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or anyequipment containing such information.“Business Day” is any day that is not a Saturday, Sunday or a day on which Collateral Agent is closed.“Cash Equivalents” are (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any Statethereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after itscreation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc., and (c) certificates of depositmaturing no more than one (1) year after issue provided that the account in which any such certificate of deposit is maintained is subject to a ControlAgreement in favor of Collateral Agent. For the avoidance of doubt, the direct purchase by Borrower or any of its Subsidiaries of any Auction Rate Securities,or purchasing participations in, or entering into any type of swap or other derivative transaction, or otherwise holding or engaging in any ownership interestin any type of Auction Rate Security by Borrower or any of its Subsidiaries shall be conclusively determined by the Lenders as an ineligible CashEquivalent, and any such transaction shall expressly violate each other provision of this Agreement governing Permitted Investments. Notwithstanding theforegoing, Cash Equivalents does not include and Borrower, and each of its Subsidiaries, are prohibited from purchasing, purchasing participations in,entering into any type of swap or other equivalent derivative transaction, or otherwise holding or engaging in any ownership interest in any type of debtinstrument, including, without limitation, any corporate or municipal bonds with a long-term nominal maturity for which the interest rate is reset through adutch auction and more commonly referred to as an auction rate security (each, an “Auction Rate Security”).“Claims” are defined in Section 12.2.“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of New York; provided, that, to theextent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of theCode, the definition WEST\274507290.5 368986-00013525  of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all ofthe attachment, perfection, or priority of, or remedies with respect to, Collateral Agent’s Lien on any Collateral is governed by the Uniform Commercial Codein effect in a jurisdiction other than the State of New York, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such otherjurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relatingto such provisions.“Collateral” is any and all properties, rights and assets of Borrower described on Exhibit A.“Collateral Account” is any Deposit Account, Securities Account, or Commodity Account, or any other bank account maintained by Borrower orany Subsidiary at any time.“Collateral Agent” is, Oxford, not in its individual capacity, but solely in its capacity as agent on behalf of and for the benefit of the Lenders.“Commitment Percentage” is set forth in Schedule 1.1, as amended from time to time.“Commodity Account” is any “commodity account” as defined in the Code with such additions to such term as may hereafter be made.“Communication” is defined in Section 10.“Compliance Certificate” is that certain certificate in the form attached hereto as Exhibit C.“Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend,letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse bythat Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) allobligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangementdesignated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does notinclude endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primaryobligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Personin good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.“Control Agreement” is any control agreement entered into among the depository institution at which Borrower or any of its Subsidiaries maintainsa Deposit Account or the securities intermediary or commodity intermediary at which Borrower or any of its Subsidiaries maintains a Securities Account or aCommodity Account, Borrower and such Subsidiary, and Collateral Agent pursuant to which Collateral Agent obtains control (within the meaning of theCode) for the benefit of the Lenders over such Deposit Account, Securities Account, or Commodity Account.“Copyrights” are any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship andderivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.“Credit Extension” is any Term Loan or any other extension of credit by Collateral Agent or Lenders for Borrower’s benefit.“Default Rate” is defined in Section 2.3(b).“Deposit Account” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.“Designated Deposit Account” is Borrower’s deposit account, account number 203241930, maintained with Citibank, N.A.“Disbursement Letter” is that certain form attached hereto as Exhibit B. WEST\274507290.5 368986-00013526  “Dollars,” “dollars” and “$” each mean lawful money of the United States. “Effective Date” is defined in the preamble of this Agreement.“Eligible Assignee” is (i) a Lender, (ii) an Affiliate of a Lender, (iii) an Approved Fund and (iv) any commercial bank, savings and loan associationor savings bank or any other entity which is an “accredited investor” (as defined in Regulation D under the Securities Act of 1933, as amended) and whichextends credit or buys loans as one of its businesses, including insurance companies, mutual funds, lease financing companies and commercial financecompanies, in each case, which either (A) has a rating of BBB or higher from Standard & Poor’s Rating Group and a rating of Baa2 or higher from Moody’sInvestors Service, Inc. at the date that it becomes a Lender or (B) has total assets in excess of Five Billion Dollars ($5,000,000,000.00), and in each case ofclauses (i) through (iv), which, through its applicable lending office, is capable of lending to Borrower without the imposition of any withholding or similartaxes; provided that notwithstanding the foregoing, “Eligible Assignee” shall not include, unless an Event of Default has occurred and is continuing, (i)Borrower or any of Borrower’s Affiliates or Subsidiaries or (ii) a direct competitor of Borrower or a vulture hedge fund, each as determined by CollateralAgent in its reasonable good faith business discretion. Notwithstanding the foregoing, (x) in connection with assignments by a Lender due to a forceddivestiture at the request of any regulatory agency, the restrictions set forth herein shall not apply and Eligible Assignee shall mean any Person or party and(y) in connection with a Lender’s own financing or securitization transactions, the restrictions set forth herein shall not apply and Eligible Assignee shallmean any Person or party providing such financing or formed to undertake such securitization transaction and any transferee of such Person or party upon theoccurrence of a default, event of default or similar occurrence with respect to such financing or securitization transaction; provided that no such sale, transfer,pledge or assignment under this clause (y) shall release such Lender from any of its obligations hereunder or substitute any such Person or party for suchLender as a party hereto until Collateral Agent shall have received and accepted an effective assignment agreement from such Person or party in formsatisfactory to Collateral Agent executed, delivered and fully completed by the applicable parties thereto, and shall have received such other informationregarding such Eligible Assignee as Collateral Agent reasonably shall require.“Equipment” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitationall machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.“ERISA” is the Employee Retirement Income Security Act of 1974, as amended, and its regulations. “Event of Default” is defined in Section 8.“Final Payment” is a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest) due on theearliest to occur of (a) the Maturity Date, or (b) the acceleration of any Term Loan, or (c) the prepayment of a Term Loan pursuant to Section 2.2(c) or (d),equal to the original principal amount of such Term Loan multiplied by the Final Payment Percentage, payable to Lenders in accordance with their respectivePro Rata Shares.“Final Payment Percentage” is seven and one-half percent (7.50%).“Foreign Subsidiary” is a Subsidiary that is not an entity organized under the laws of the United States or any territory thereof.“Funding Date” is any date on which a Credit Extension is made to or on account of Borrower which shall be a Business Day.“GAAP” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of theAmerican Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such otherstatements by such other Person as may be approved by a significant segment of the accounting profession in the United States, which are applicable to thecircumstances as of the date of determination. WEST\274507290.5 368986-00013527  “General Intangibles” are all “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as mayhereafter be made, and includes without limitation, all copyright rights, copyright applications, copyright registrations and like protections in each work ofauthorship and derivative work, whether published or unpublished, any patents, trademarks, service marks and, to the extent permitted under applicable law,any applications therefor, whether registered or not, any trade secret rights, including any rights to unpatented inventions, payment intangibles, royalties,contract rights, goodwill, franchise agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims, income and other taxrefunds, security and other deposits, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether incontract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments ofinsurance and rights to payment of any kind.“Governmental Approval” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing ornotice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.“Governmental Authority” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality,regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertainingto government, any securities exchange and any self-regulatory organization.“Guarantor” is any Person providing a Guaranty in favor of Collateral Agent.“Guaranty” is any guarantee of all or any part of the Obligations, as the same may from time to time be amended, restated, modified or otherwisesupplemented.“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations forsurety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d)Contingent Obligations.“Indemnified Person” is defined in Section 12.2.“Insolvency Proceeding” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy orinsolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seekingreorganization, arrangement, or other relief.“Insolvent” means not Solvent.“Intellectual Property” means all of Borrower’s or any Subsidiary’s right, title and interest in and to the following:(a)its Copyrights, Trademarks and Patents;(b)any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how,operating manuals;(c)any and all source code;(d)any and all design rights which may be available to Borrower;(e)any and all claims for damages by way of past, present and future infringement of any of the foregoing, with the right, but not theobligation, to sue for and collect such damages for said use or infringement of the Intellectual Property rights identified above; and(f)all amendments, renewals and extensions of any of the Copyrights, Trademarks orPatents. WEST\274507290.5 368986-00013528  “Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, andincludes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, includingwithout limitation such inventory as is temporarily out of any Person’s custody or possession or in transit and including any returned goods and anydocuments of title representing any of the above.“Investment” is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance,payment or capital contribution to any Person.“Key Person” is each of Borrower’s (i) Chief Executive Officer, who is David Corey as of the Effective Date, (ii) Chief Financial Officer, who isJames Welch as of the Effective Date, (iii) Chief Business Officer, who is James Shaffer as of the Effective Date and (iv) Chief Medical Officer, who is JoanneQuan as of the Effective Date.“Lender” is any one of the Lenders.“Lenders” are the Persons identified on Schedule 1.1 hereto and each assignee that becomes a party to this Agreement pursuant to Section 12.1.“Lenders’ Expenses” are all audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees and expenses, as well as appraisalfees, fees incurred on account of lien searches, inspection fees, and filing fees) for preparing, amending, negotiating, administering, defending and enforcingthe Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred by CollateralAgent and/or the Lenders in connection with the Loan Documents.“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest, or other encumbrance of any kind, whether voluntarily incurred orarising by operation of law or otherwise against any property.“Loan Documents” are, collectively, this Agreement, the Warrants, the Perfection Certificates, each Compliance Certificate, each DisbursementLetter, the Post Closing Letter, any subordination agreements, any note, or notes or guaranties executed by Borrower or any other Person, and any otherpresent or future agreement entered into by Borrower, any Guarantor or any other Person for the benefit of the Lenders and Collateral Agent in connectionwith this Agreement; all as amended, restated, or otherwise modified.“Material Adverse Change” is (a) a material impairment in the perfection or priority of Collateral Agent’s Lien in the Collateral or in the value ofsuch Collateral; (b) a material adverse change in the business, operations or condition (financial or otherwise) of Borrower or any Subsidiary; or (c) a materialimpairment of the prospect of repayment of any portion of the Obligations.“Maturity Date” is July 1, 2021.“Obligations” are all of Borrower’s obligations to pay when due any debts, principal, interest, Lenders’ Expenses, the Prepayment Fee, the FinalPayment, and other amounts Borrower owes the Lenders now or later, in connection with, related to, following, or arising from, out of or under, thisAgreement or, the other Loan Documents (other than the Warrants), or otherwise, and including interest accruing after Insolvency Proceedings begin (whetheror not allowed) and debts, liabilities, or obligations of Borrower assigned to the Lenders and/or Collateral Agent, and the performance of Borrower’s dutiesunder the Loan Documents (other than the Warrants).“OFAC” is the U.S. Department of Treasury Office of Foreign Assets Control.“OFAC Lists” are, collectively, the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to Executive Order No.13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other restricted Persons maintained pursuant to any of the rules andregulations of OFAC or pursuant to any other applicable Executive Orders. WEST\274507290.5 368986-00013529  “Operating Documents” are, for any Person, such Person’s formation documents, as certified by the Secretary of State (or equivalent agency) of suchPerson’s jurisdiction of organization on a date that is no earlier than thirty (30) days prior to the Effective Date, and, (a) if such Person is a corporation, itsbylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Personis a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.“Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals,reissues, extensions and continuations-in-part of the same.“Payment Date” is the first (1st) calendar day of each calendar month, commencing on February 1, 2017. “Perfection Certificate” and “PerfectionCertificates” is defined in Section 5.1.“Permitted Acquisition” means an acquisition by Borrower of all or substantially all of the assets of, all of the ownership interests in, or a businessline or unit or division of another Person and shall include any foreign corporations in the acceptable jurisdictions listed below in this definition; providedthat (a) no Event of Default or event that with the passage of time would result in an Event of Default shall exist immediately before or immediately after theconsummation of such acquisition, (b) such acquired Person or assets shall be in the same line of business as is conducted by Borrower as of the EffectiveDate (or a line of business reasonably related thereto), (c) such acquisition shall not cause the focus or locations of Borrower’s and its Subsidiaries’ operations(when taken as a whole) to be located outside of the United States, (d) such acquisition shall not constitute a hostile acquisition, (e) any Person acquired as aresult of such acquisition shall, if requested by Collateral Agent become a secured guarantor or co-Borrower, (f) in connection with such acquisition, neitherBorrower nor any of its Subsidiaries (including for this purpose, the target of the acquisition) shall acquire or be subject to any Indebtedness or Liens that arenot otherwise permitted hereunder, (g) all of the consideration paid in connection with such acquisition shall be in the form of stock of Borrower, except thatBorrower shall be permitted to pay reasonable closing costs, not to exceed One Hundred Thousand Dollars ($100,000.00) in the aggregate in cash, (h)Borrower has notified the Lenders at least ten (10) Business Days in advance of entering into such transaction, which notice shall include a reasonablydetailed description of such transaction, (i) such transaction shall only involve assets and entities located in the United States, Canada and the UnitedKingdom, (j) Collateral Agent and the Lenders have received evidence, in form and substance reasonably satisfactory to them that Borrower has sufficientcash on hand to pay its projected expenses and all debt service when due for a period of twelve (12) months after the consummation of such transaction, (k)all transactions related to such acquisition shall be consummated in all material respects in accordance with applicable law; and (l) Borrower shall provide tothe Lenders as soon as available but in any event not later than five (5) Business Days after the execution thereof, a copy of the executed purchase agreementor similar agreement with respect to any such acquisition.“Permitted Indebtedness” is:(a)Borrower’s Indebtedness to the Lenders and Collateral Agent under this Agreement and the other Loan Documents;(b)Indebtedness existing on the Effective Date and disclosed on the Perfection Certificate(s);(c)Subordinated Debt;(d)unsecured Indebtedness to trade creditors incurred in the ordinary course of business;(e)Indebtedness consisting of capitalized lease obligations and purchase money Indebtedness, in each case incurred by Borrower orany of its Subsidiaries to finance the acquisition, repair, improvement or construction of fixed or capital assets of such person, provided that (i) the aggregateoutstanding principal amount of all such Indebtedness does not exceed Five Hundred Thousand Dollars ($500,000.00) at any time and (ii) the principalamount of such Indebtedness does not exceed the lower of the cost or fair market value of the property so acquired or built or of such repairs or improvementsfinanced with such Indebtedness (each measured at the time of such acquisition, repair, improvement or construction is made);(f)Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of Borrower’s business; WEST\274507290.5 368986-00013530  (g)extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (e)above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose materially more burdensome terms uponBorrower, or its Subsidiary, as the case may be; and(h)Other unsecured Indebtedness not to exceed Two Hundred Fifty Thousand Dollars ($250,000.00) at any time outstanding.“Permitted Investments” are:(a)Investments disclosed on the Perfection Certificate(s) and existing on the Effective Date;(b)(i) Investments consisting of cash and Cash Equivalents, and (ii) any other Investments permitted by Borrower’s investmentpolicy, as amended from time to time, provided that such investment policy (and any such amendment thereto) has been approved in writing by CollateralAgent (and Collateral Agent acknowledges the investment policy delivered on or prior to the Effective Date is hereby approved);(c)Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in theordinary course of Borrower;(d)Investments consisting of deposit accounts in which Collateral Agent has a perfected security interest;(e)Investments in connection with Transfers permitted by Section 7.1;(f)Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in theordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiariespursuant to employee stock purchase plans or agreements approved by Borrower’s Board of Directors; not to exceed Two Hundred Fifty Thousand Dollars($250,000.00) in the aggregate for (i) and (ii) in any fiscal year;(g)Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliersand in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business;(h)Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers whoare not Affiliates, in the ordinary course of business; provided that this paragraph (h) shall not apply to Investments of Borrower in any Subsidiary;(i)non-cash Investments in joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting of the non-exclusive licensing of technology, the development of technology or the providing of technical support;(j)other Investments not otherwise permitted herein provided that the aggregate amount of all such Investments in any year shallnot exceed One Hundred Fifty Thousand Dollars ($150,000.00); and(k)Permitted Acquisitions, including any investments that are held by acquired Persons acquired pursuant to PermittedAcquisitions, to the extent permitted in accordance with the definition of such term “Permitted Acquisition”.“Permitted Licenses” are (A) licenses of over-the-counter software that is commercially available to the public, and (B) non-exclusive and exclusivelicenses for the use of the Intellectual Property of Borrower or any of its Subsidiaries entered into in the ordinary course of business, provided, that, withrespect to each such license described in clause (B), (i) no Event of Default has occurred or is continuing at the time of such license; (ii) the licenseconstitutes an arms-length transaction, the terms of which, on their face, do not provide for a sale or assignment of any Intellectual Property and do not restrictthe ability of Borrower or any of its Subsidiaries, as applicable, to pledge, grant a security interest in or lien on, or assign or otherwise Transfer anyIntellectual Property; (iii) in the case of any exclusive license, (x) Borrower delivers ten (10) days’ prior written notice and a brief summary of the terms of theproposed license to Collateral Agent and the Lenders and delivers to Collateral Agent and the Lenders copies of the final executed licensing documents inconnection with the exclusive license promptly upon consummation thereof, and (y) any such license could not result in a legal WEST\274507290.5 368986-00013531  transfer of title of the licensed property but may be exclusive in respects other than territory and may be exclusive as to territory only as to discretegeographical areas outside of the United States; and (iv) all upfront payments, royalties, milestone payments or other proceeds arising from the licensingagreement that are payable to Borrower or any of its Subsidiaries are paid to a Deposit Account that is governed by a Control Agreement.“Permitted Liens” are:(a)Liens existing on the Effective Date and disclosed on the Perfection Certificates or arising under this Agreement and the otherLoan Documents;(b)Liens for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being contested ingood faith and for which Borrower maintains adequate reserves on its Books, provided that no notice of any such Lien has been filed or recorded under theInternal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;(c)liens securing Indebtedness permitted under clause (e) of the definition of “Permitted Indebtedness,” provided that (i) such liensexist prior to the acquisition of, or attach substantially simultaneous with, or within twenty (20) days after the, acquisition, lease, repair, improvement orconstruction of, such property financed or leased by such Indebtedness and (ii) such liens do not extend to any property of Borrower other than the property(and proceeds thereof) acquired, leased or built, or the improvements or repairs, financed by such Indebtedness;(d)Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course ofbusiness so long as such Liens attach only to Inventory, securing liabilities in the aggregate amount not to exceed Twenty Five Thousand Dollars($25,000.00), and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedingswhich proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;(e)Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other likeobligations incurred in the ordinary course of business (other than Liens imposed by ERISA);(f)Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but anyextension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness maynot increase;(g)leases or subleases of real property granted in the ordinary course of Borrower’s business (or, if referring to another Person, in theordinary course of such Person’s business), and leases, subleases, non-exclusive licenses or sublicenses of personal property (other than Intellectual Property)granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), if the leases,subleases, licenses and sublicenses do not prohibit granting Collateral Agent or any Lender a security interest therein;(h)banker’s liens, rights of setoff and Liens in favor of financial institutions incurred in the ordinary course of business arising inconnection with Borrower’s deposit accounts or securities accounts held at such institutions solely to secure payment of fees and similar costs and expensesand provided such accounts are maintained in compliance with Section 6.6(b) hereof;(i)Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 8.4 or8.7; and(j)Liens consisting of Permitted Licenses.“Person” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization,association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.“Post Closing Letter” is that certain Post Closing Letter dated as of the Effective Date by and between Collateral Agent and Borrower. WEST\274507290.5 368986-00013532  “Prepayment Fee” is, with respect to any Term Loan subject to prepayment prior to the Maturity Date, whether by mandatory or voluntaryprepayment, acceleration or otherwise, an additional fee payable to the Lenders in amount equal to:(i)for a prepayment made on or after the Funding Date of such Term Loan through and including the first anniversary of theFunding Date of such Term Loan, three percent (3.00%) of the principal amount of such Term Loan prepaid;(ii)for a prepayment made after the date which is after the first anniversary of the Funding Date of such Term Loan throughand including the second anniversary of the Funding Date of such Term Loan, two percent (2.00%) of the principal amount of the Term Loans prepaid; and(iii)for a prepayment made after the date which is after the second anniversary of the Funding Date of such Term Loan andprior to the Maturity Date, one percent (1.00%) of the principal amount of the Term Loans prepaid.“Pro Rata Share” is, as of any date of determination, with respect to each Lender, a percentage (expressed as a decimal, rounded to the ninth decimalplace) determined by dividing the outstanding principal amount of Term Loans held by such Lender by the aggregate outstanding principal amount of allTerm Loans.“Registered Organization” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made.“Required Lenders” means (i) for so long as all of the Persons that are Lenders on the Effective Date (each an “Original Lender”) have not assignedor transferred any of their interests in their Term Loan, Lenders holding one hundred percent (100%) of the aggregate outstanding principal balance of theTerm Loan, or (ii) at any time from and after any Original Lender has assigned or transferred any interest in its Term Loan, Lenders holding at least sixty sixpercent (66%) of the aggregate outstanding principal balance of the Term Loan and, in respect of this clause (ii), (A) each Original Lender that has notassigned or transferred any portion of its Term Loan, (B) each assignee or transferee of an Original Lender’s interest in the Term Loan, but only to the extentthat such assignee or transferee is an Affiliate or Approved Fund of such Original Lender, and (C) any Person providing financing to any Person described inclauses (A) and (B) above; provided, however, that this clause (C) shall only apply upon the occurrence of a default, event of default or similar occurrencewith respect to such financing.“Requirement of Law” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty,rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or anyof its property or to which such Person or any of its property is subject.“Responsible Officer” is any of the President, Chief Executive Officer, or Chief Financial Officer of Borrower acting alone.“Second Draw Period” is the period commencing on the date of the occurrence of the Term B Milestones and ending on the earliest of (i) sixty (60)days from the occurrence of the Term B Milestones, (ii) March 31, 2018 and (iii) the occurrence of an Event of Default; provided, however, that the SecondDraw Period shall not commence if on the date of the occurrence of the Term B Milestones an Event of Default has occurred and is continuing.“Secured Promissory Note” is defined in Section 2.4.“Secured Promissory Note Record” is a record maintained by each Lender with respect to the outstanding Obligations owed by Borrower to Lenderand credits made thereto.“Securities Account” is any “securities account” as defined in the Code with such additions to such term as may hereafter be made. WEST\274507290.5 368986-00013533  “Shares” is one hundred percent (100%) of the issued and outstanding capital stock, membership units or other securities owned or held of record byBorrower or Borrower’s Subsidiary, in any Subsidiary; provided that, in the event Borrower, demonstrates to Collateral Agent’s reasonable satisfaction, that apledge of more than sixty five percent (65%) of the Shares of such Subsidiary which is a Foreign Subsidiary, creates a present and existing adverse taxconsequence to Borrower under the U.S. Internal Revenue Code, “Shares” shall mean sixty-five percent (65%) of the issued and outstanding capital stock,membership units or other securities owned or held of record by Borrower or its Subsidiary in such Foreign Subsidiary.“Solvent” is, with respect to any Person: the fair salable value of such Person’s consolidated assets (including goodwill minus disposition costs)exceeds the fair value of such Person’s liabilities; such Person is not left with unreasonably small capital after the transactions in this Agreement; and suchPerson is able to pay its debts (including trade debts) as they mature.“Success Fee” is defined in the Success Fee Agreement.“Success Fee Agreement” means that certain Success Fee Agreement, dated as of the Effective Date, by and among Borrower, the Collateral Agentand Lenders.“Subordinated Debt” is indebtedness incurred by Borrower or any of its Subsidiaries subordinated to all Indebtedness of Borrower and/or itsSubsidiaries to the Lenders (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Collateral Agent andthe Lenders entered into between Collateral Agent, Borrower, and/or any of its Subsidiaries, and the other creditor), on terms acceptable to Collateral Agentand the Lenders.“Subsidiary” is, with respect to any Person, any Person of which more than fifty percent (50%) of the voting stock or other equity interests (in thecase of Persons other than corporations) is owned or controlled, directly or indirectly, by such Person or through one or more intermediaries.“Term Loan” is defined in Section 2.2(a)(ii) hereof.“Term A Loan” is defined in Section 2.2(a)(i) hereof.“Term B Loan” is defined in Section 2.2(a)(ii) hereof.“Term B Milestones” means Borrower has achieved (1) positive final data from the lonafarnib Phase 2 LOWR-HDV-2,3,4 trials in hepatitis deltavirus (“HDV”), achievement of which hereby is acknowledged by Collateral Agent, and (2) positive data from at least one of the following programs (i)pegylated interferon lambda 1a (“PEG-IFN Lambda”) LIMT-HDV Phase 2 trial in HDV, (ii) Exendin Phase 2 trial in post-bariatric surgery associatedhypoglycemia under Eider’s own IND, (iii) ubenimex LIBERTY Phase 2 trial in pulmonary arterial hypertension (“PAH”), or (iv) ubenimex ULTRA Phase 2trial in lymphedema; in each case, provided that Borrower has provided to Collateral Agent written evidence of the same, in form and content acceptable toCollateral Agent in its sole discretion.“Term Loan Commitment” is, for any Lender, the obligation of such Lender to make a Term Loan, up to the principal amount shown on Schedule1.1. “Term Loan Commitments” means the aggregate amount of such commitments of all Lenders.“Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and likeprotections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.“Transfer” is defined in Section 7.1. WEST\274507290.5 368986-00013534  IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date. BORROWER: EIGER BIOPHARMACEUTICALS, INC. By: /s/ James WelchName: James WelchTitle: CFO EB PHARMA, LLC By: James P. ShafferIts: By: Name:James Shaffer Title: EBPI MERGER, INC. By: /s/ James WelchName: James WelchTitle: CFO COLLATERAL AGENT AND LENDER: OXFORD FINANCE LLC By: /s/ Mark DavisName: Mark DavisTitle: Vice President – Finance, Secretary & Treasurer [Signature Page to Loan and Security Agreement]WEST\274507290.5 368986-000135  SCHEDULE 1.1Lenders and CommitmentsTerm A LoansLenderTerm Loan CommitmentCommitment PercentageOXFORD FINANCE LLC$15,000,000.00100.00%TOTAL$15,000,000.00100.00% Term B LoansLenderTerm Loan CommitmentCommitment PercentageOXFORD FINANCE LLC$10,000,000.00100.00%TOTAL$10,000,000.00100.00% Aggregate (all Term Loans)LenderTerm Loan CommitmentCommitment PercentageOXFORD FINANCE LLC$25,000,000.00100.00%TOTAL$25,000,000.00100.00% WEST\274507290.5 368986-000135  EXHIBIT ADescription of CollateralThe Collateral consists of all of Borrower’s right, title and interest in and to the following personal property:All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, licenseagreements, franchise agreements, General Intangibles (except as noted below), commercial tort claims, documents, instruments (including any promissorynotes), chattel paper (whether tangible or electronic), cash, deposit accounts and other Collateral Accounts, all certificates of deposit, fixtures, letters of creditrights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets,whether now owned or hereafter acquired, wherever located; andAll Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions,attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.Notwithstanding the foregoing, the Collateral does not include any Intellectual Property; provided, however, the Collateral shall include allAccounts and all proceeds of Intellectual Property. If a judicial authority (including a U.S. Bankruptcy Court) would hold that a security interest in theunderlying Intellectual Property is necessary to have a security interest in such Accounts and such property that are proceeds of Intellectual Property, then theCollateral shall automatically, and effective as of the Effective Date, include the Intellectual Property to the extent necessary to permit perfection ofCollateral Agent’s security interest in such Accounts and such other property of Borrower that are proceeds of the Intellectual Property; or (ii) more than 65%of the total combined voting power of all classes of stock entitled to vote the shares of capital stock (the “Shares”) of any Foreign Subsidiary, if Borrowerdemonstrates to Collateral Agent’s reasonable satisfaction that a pledge of more than sixty five percent (65%) of the Shares of such Subsidiary creates apresent and existing adverse tax consequence to Borrower under the U.S. Internal Revenue Code.Pursuant to the terms of a certain negative pledge arrangement with Collateral Agent and the Lenders, Borrower has agreed not to encumber any ofits Intellectual Property. WEST\274507290.5 368986-000135  EXHIBIT BForm of Disbursement Letter[see attached] WEST\274507290.5 368986-000135  DISBURSEMENT LETTERDecember 30, 2016The undersigned, being the duly elected and acting of EIGER BIOPHARMACEUTICALS, INC., a Delaware corporation with offices located at 350Cambridge Ave. Suite 350, Palo Alto, CA 94306, for itself and on behalf of all Borrowers under the Loan Agreement (defined below) (“Borrower”), doeshereby certify to OXFORD FINANCE LLC (“Oxford” and “Lender”), as collateral agent (the “Collateral Agent”) in connection with that certain Loan andSecurity Agreement dated as of December 30, 2016, by and among Borrower, Collateral Agent and the Lenders from time to time party thereto (the “LoanAgreement”; with other capitalized terms used below having the meanings ascribed thereto in the Loan Agreement) that:1.The representations and warranties made by Borrower in Section 5 of the Loan Agreement and in the other Loan Documents are true andcorrect in all material respects as of the date hereof.2.No event or condition has occurred that would constitute an Event of Default under the Loan Agreement or any other Loan Document.3.Borrower is in compliance with the covenants and requirements contained in Sections 4, 6 and 7 of the Loan Agreement.4.All conditions referred to in Section 3 of the Loan Agreement to the making of the Loan to be made on or about the date hereof have beensatisfied or waived by Collateral Agent.5.No Material Adverse Change has occurred.6.The undersigned is a Responsible Officer.[Balance of Page Intentionally Left Blank] WEST\274507290.5 368986-000135  7.The proceeds of the Term A Loan shall be disbursed as follows: Disbursement from Oxford: Loan Amount $15,000,000.00Plus: --Deposit Received $50,000.00 Less: --Facility Fee ($75,000.00)[--Interim Interest ($_________)]--Lender’s Legal Fees ($_________)* TOTAL TERM A LOAN NET PROCEEDS FROM OXFORD: $___________ 8.The Term A Loan shall amortize in accordance with the Amortization Table attached hereto.9.The aggregate net proceeds of the Term Loans shall be transferred to the Designated Deposit Account as follows: Account Name: EIGER BIOPHARMACEUTICALS, INC. Bank Name: [____________] Bank Address: [____________] Account Number: ABA Number: [____________] [Balance of Page Intentionally Left Blank] * Legal fees and costs are through the Effective Date. Post-closing legal fees and costs, payable after the Effective Date, to be invoiced and paid post-closing. WEST\274507290.5 368986-000135  Dated as of the date first set forth above.BORROWER:EIGER BIOPHARMACEUTICALS, INC.,for itself and on behalf of all Borrowers under the Loan Agreement By Name: Title: COLLATERAL AGENT AND LENDER:OXFORD FINANCE LLC By Name: Title: [Signature Page to Disbursement Letter]WEST\274507290.5 368986-000135  AMORTIZATION TABLE(Term A Loan)[see attached] WEST\274507290.5 368986-000135  EXHIBIT CCompliance Certificate TO: OXFORD FINANCE LLC, as Collateral Agent and Lender FROM: EIGER BIOPHARMACEUTICALS, INC.,for itself and on behalf of all Borrowers under the Loan Agreement The undersigned authorized officer (“Officer”) of EIGER BIOPHARMACEUTICALS, INC., for itself and on behalf of all Borrowers under the LoanAgreement (as defined below) (“Borrower”), hereby certifies that in accordance with the terms and conditions of the Loan and Security Agreement by andamong Borrower, Collateral Agent, and the Lenders from time to time party thereto (the “Loan Agreement;” capitalized terms used but not otherwise definedherein shall have the meanings given them in the Loan Agreement),(a)Borrower is in complete compliance for the period ending with all required covenants except as noted below;(b)There are no Events of Default, except as noted below;(c)Except as noted below, all representations and warranties of Borrower stated in the Loan Documents are true and correct in allmaterial respects on this date and for the period described in (a), above; provided, however, that such materiality qualifier shall not be applicable to anyrepresentations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations andwarranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date.(d)Borrower, and each of Borrower’s Subsidiaries, has timely filed, or filed for extensions,all required tax returns and reports,Borrower, and each of Borrower’s Subsidiaries, has timely paid all foreign, federal, state, and local taxes, assessments, deposits and contributions owed byBorrower, or Subsidiary, except as otherwise permitted pursuant to the terms of Section 5.8 of the Loan Agreement;(e)No Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll orbenefits of which Borrower has not previously provided written notification to Collateral Agent and the Lenders in accordance with the Loan Agreement.Attached are the required documents, if any, supporting our certification(s). The Officer, on behalf of Borrower, further certifies that the attached financialstatements are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the nextexcept as explained in an accompanying letter or footnotes and except, in the case of unaudited financial statements, for the absence of footnotes and subjectto year-end audit adjustments as to the interim financial statements. WEST\274507290.5 368986-000135  Please indicate compliance status since the last Compliance Certificate by circling Yes, No, or N/A under “Complies” column. Reporting Covenant Requirement Actual Complies 1)Financial statements Monthly within 30 days YesNoN/A 2)Annual (CPA Audited) statements Within 120 days after FYE YesNoN/A Annual Financial 3)Projections/Budget (prepared on a monthly basis) Annually (within 30 days of FYE), andwhen revised YesNoN/A 4)A/R & A/P agings If applicable YesNoN/A 5)8-K, 10-K and 10-Q Filings If applicable, within 5 days of filing YesNoN/A 6)Compliance Certificate Monthly within 30 days YesNoN/A 7)IP Report When required YesNoN/A 8)Total amount of Borrower’s cashand cash equivalents at the lastday of the measurement period $ YesNoN/A9)Total amount of Borrower’sSubsidiaries’ cash and cashequivalents at the last day of themeasurement period $ YesNoN/ADeposit and Securities Accounts(Please list all accounts; attach separate sheet if additional space needed) Institution NameAccount NumberNew Account?Account ControlAgreement in place? 1) YesNoYesNo 2) YesNoYesNo 3) YesNoYesNo 4) YesNoYesNoFinancial CovenantsNoneOther Matters 1)Have there been any changes in management since the last Compliance Certificate?YesNo2)Have there been any transfers/sales/disposals/retirement of Collateral or IP prohibited by the Loan Agreement?YesNo 3)Have there been any new or pending claims or causes of action against Borrower that involve more than Two Hundred Fifty ThousandDollars ($250,000.00)?YesNo4)Have there been any material changes to the capitalization table of Borrower or any amendments or other changes to the OperatingDocuments of Borrower or any of its Subsidiaries? If yes, provide copies of any such amendments or changes with this ComplianceCertificate.YesNo WEST\274507290.5 368986-000135  ExceptionsPlease explain any exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions.” Attach separate sheet if additional spaceneeded.)EIGER BIOPHARMACEUTICALS, INC.,for itself and on behalf of all Borrowers under the Loan Agreement By Name: Title: Date: LENDER USE ONLY Received by: Date: Verified by: Date: Compliance Status: Yes No WEST\274507290.5 368986-000135  EXHIBIT DForm of Secured Promissory Note[see attached] WEST\274507290.5 368986-000135  SECURED PROMISSORY NOTE(Term A Loan) $15,000,000.00Dated: December 30, 2016FOR VALUE RECEIVED, the undersigned, EIGER BIOPHARMACEUTICALS, INC., a Delaware corporation (“Parent”), EB Pharma, LLC, aDelaware limited liability company (“EB Pharma”) and EBPI Merger, Inc. (“EBPI”), each with offices located at 350 Cambridge Ave. Suite 350, Palo Alto,CA 94306 (Parent, EB Pharma and EBPI, individually and collectively, jointly and severally, “Borrower”), HEREBY PROMISES TO PAY to the order ofOXFORD FINANCE LLC (“Lender”) the principal amount of FIFTEEN MILLION DOLLARS ($15,000,000.00) or such lesser amount as shall equal theoutstanding principal balance of the Term A Loan made to Borrower by Lender, plus interest on the aggregate unpaid principal amount of such Term A Loan,at the rates and in accordance with the terms of the Loan and Security Agreement dated December 30, 2016 by and among Borrower, Lender, Oxford FinanceLLC, as Collateral Agent, and the other Lenders from time to time party thereto (as amended, restated, supplemented or otherwise modified from time to time,the “Loan Agreement”). If not sooner paid, the entire principal amount and all accrued and unpaid interest hereunder shall be due and payable on theMaturity Date as set forth in the Loan Agreement. Any capitalized term not otherwise defined herein shall have the meaning attributed to such term in theLoan Agreement.Principal, interest and all other amounts due with respect to the Term A Loan, are payable in lawful money of the United States of America to Lender as setforth in the Loan Agreement and this Secured Promissory Note (this “Note”). The principal amount of this Note and the interest rate applicable thereto, andall payments made with respect thereto, shall be recorded by Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of thisNote.The Loan Agreement, among other things, (a) provides for the making of a secured Term A Loan by Lender to Borrower, and (b) contains provisions foracceleration of the maturity hereof upon the happening of certain stated events.This Note may not be prepaid except as set forth in Section 2.2 (c) and Section 2.2(d) of the Loan Agreement.This Note and the obligation of Borrower to repay the unpaid principal amount of the Term A Loan, interest on the Term A Loan and all other amounts dueLender under the Loan Agreement is secured under the Loan Agreement.Presentment for payment, demand, notice of protest and all other demands and notices of any kind in connection with the execution, delivery, performanceand enforcement of this Note are hereby waived.Borrower shall pay all reasonable fees and expenses, including, without limitation, reasonable attorneys’ fees and costs, incurred by Lender in theenforcement or attempt to enforce any of Borrower’s obligations hereunder not performed when due.This Note shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of New York.The ownership of an interest in this Note shall be registered on a record of ownership maintained by Lender or its agent. Notwithstanding anything else inthis Note to the contrary, the right to the principal of, and stated interest on, this Note may be transferred only if the transfer is registered on such record ofownership and the transferee is identified as the owner of an interest in the obligation. Borrower shall be entitled to treat the registered holder of this Note (asrecorded on such record of ownership) as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to orinterest in this Note on the part of any other person or entity. [Balance of Page Intentionally Left Blank] WEST\274507290.5 368986-000135  IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of its officers thereunto duly authorized on the date hereof. BORROWER: EIGER BIOPHARMACEUTICALS, INC. By: Name: Title: EB PHARMA, LLC By: Its: By: Name: Title: EBPI MERGER, INC. By: Name: Title: WEST\274507290.5 368986-000135  LOAN INTEREST RATE AND PAYMENTS OF PRINCIPAL Date Principal Amount Interest Rate ScheduledPayment Amount Notation By WEST\274507290.5 368986-000135  CORPORATE BORROWING CERTIFICATE[agreed form to be “duplicated” for each Borrower] Borrower: EIGER BIOPHARMACEUTICALS, INC. Date: December 30, 2016Lender: OXFORD FINANCE LLC, as Collateral Agent and Lender I hereby certify as follows, as of the date set forth above:1.I am the Secretary, Assistant Secretary or other officer of Borrower. My title is as set forth below.2.Borrower’s exact legal name is set forth above. Borrower is a corporation existing under the laws of the State of Delaware.3.Attached hereto as Exhibit A and Exhibit B, respectively, are true, correct and complete copies of (i) Borrower’s Certificate of Incorporation(including amendments), as filed with the Secretary of State of the state in which Borrower is incorporated as set forth in paragraph 2 above; and (ii)Borrower’s Bylaws. Neither such Certificate of Incorporation nor such Bylaws have been amended, annulled, rescinded, revoked or supplemented, and suchCertificate of Incorporation and such Bylaws remain in full force and effect as of the date hereof.4.The following resolutions were duly and validly adopted by Borrower’s Board of Directors at a duly held meeting of such directors (or pursuant toa unanimous written consent or other authorized corporate action). Such resolutions are in full force and effect as of the date hereof and have not been in anyway modified, repealed, rescinded, amended or revoked, and the Lenders may rely on them until each Lender receives written notice of revocation fromBorrower.[Balance of Page Intentionally Left Blank] WEST\274507290.5 368986-000135  resolved, that any one of the following officers or employees of Borrower, whose names, titles and signatures are below, may act on behalf of Borrower: Name Title Signature Authorized toAdd or RemoveSignatories ☐ ☐ ☐ ☐Resolved Further, that any one of the persons designated above with a checked box beside his or her name may, from time to time, add or remove anyindividuals to and from the above list of persons authorized to act on behalf of Borrower.Resolved Further, that such individuals may, on behalf of Borrower:Borrow Money. Borrow money from the Lenders. Execute Loan Documents. Execute any loan documents any Lender requires. Grant Security. GrantCollateral Agent a security interest in any of Borrower’s assets. Negotiate Items. Negotiate or discount all drafts, trade acceptances, promissory notes, or otherindebtedness in which Borrower has an interest and receive cash or otherwise use the proceeds. Further Acts. Designate other individuals to requestadvances, pay fees and costs and execute other documents or agreements (including documents or agreement that waive Borrower’s right to a jury trial) theybelieve to be necessary to effectuate such resolutions.Resolved Further, that all acts authorized by the above resolutions and any prior acts relating thereto are ratified.[Balance of Page Intentionally Left Blank] WEST\274507290.5 368986-000135  5.The persons listed above are Borrower’s officers or employees with their titles and signatures shown next to their names. By: Name: Title: *** If the Secretary, Assistant Secretary or other certifying officer executing above is designated by the resolutions set forth in paragraph 4 as one of theauthorized signing officers, this Certificate must also be signed by a second authorized officer or director of Borrower.I, the ____________________ of Borrower, hereby certify as to paragraphs 1 through 5 above, as[print title]of the date set forth above. By: Name: Title: [Signature Page to Corporate Borrowing Certificate] WEST\274507290.5 368986-000135  EXHIBIT ACertificate of Incorporation (including amendments)[see attached] WEST\274507290.5 368986-000135  EXHIBIT BBylaws[see attached] WEST\274507290.5 368986-000135  DEBTOR: EIGER BIOPHARMACEUTICALS, INC. EB PARMA, LLC EBPI MERGER, INC. SECURED PARTY: OXFORD FINANCE LLC, as Collateral Agent EXHIBIT A TO UCC FINANCING STATEMENTDescription of CollateralThe Collateral consists of all of Debtor’s right, title and interest in and to the following personal property:All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, licenseagreements, franchise agreements, General Intangibles (except as noted below), commercial tort claims, documents, instruments (including any promissorynotes), chattel paper (whether tangible or electronic), cash, deposit accounts and other Collateral Accounts, all certificates of deposit, fixtures, letters of creditrights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets,whether now owned or hereafter acquired, wherever located; andAll Debtor’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions,attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.Notwithstanding the foregoing, the Collateral does not include any Intellectual Property; provided, however, the Collateral shall include allAccounts and all proceeds of Intellectual Property. If a judicial authority (including a U.S. Bankruptcy Court) would hold that a security interest in theunderlying Intellectual Property is necessary to have a security interest in such Accounts and such property that are proceeds of Intellectual Property, then theCollateral shall automatically, and effective as of the Effective Date, include the Intellectual Property to the extent necessary to permit perfection ofCollateral Agent’s security interest in such Accounts and such other property of Borrower that are proceeds of the Intellectual Property; or (ii) more than 65%of the total combined voting power of all classes of stock entitled to vote the shares of capital stock (the “Shares”) of any Foreign Subsidiary, if Borrowerdemonstrates to Collateral Agent’s reasonable satisfaction that a pledge of more than sixty five percent (65%) of the Shares of such Subsidiary creates apresent and existing adverse tax consequence to Borrower under the U.S. Internal Revenue Code.Pursuant to the terms of a certain negative pledge arrangement with Collateral Agent and the Lenders, Debtor has agreed not to encumber any of itsIntellectual Property.Capitalized terms used but not defined herein have the meanings ascribed in the Uniform Commercial Code in effect in the State of New York as ineffect from time to time (the “Code”) or, if not defined in the Code, then in the Loan and Security Agreement by and between Debtor, Secured Party and theother Lenders party thereto (as modified, amended and/or restated from time to time). WEST\274507290.5 368986-000135 Exhibit 21.1Subsidiaries of Registrant Name of Subsidiary Jurisdiction of Incorporation EBPI Merger, Inc. Delaware  Exhibit 23.1Consent of Independent Registered Public Accounting FirmThe Board of DirectorsEiger BioPharmaceuticals, Inc.:We consent to the incorporation by reference in registration statements (Nos. 333-203153 and 333-212114) on Form S-3 and registration statements (Nos.333-203154, 333-193662, and 333-211009) on Form S-8 of Eiger BioPharmaceuticals, Inc. of our report dated March 22, 2017, with respect to theconsolidated balance sheets of Eiger BioPharmaceuticals, Inc. as of December 31, 2016 and 2015, and the related consolidated statements of operations,comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2016, which reportappears in the December 31, 2016 annual report on Form 10-K of Eiger BioPharmaceuticals, Inc./s/ KPMG LLPSan Francisco, CaliforniaMarch 22, 2017  Exhibit 31.1Certification of the Chief Executive OfficerPursuant toSecurities Exchange Act Rules 13A-14(A) and 15D-14(A)I, David Cory, certify that:1.I have reviewed this annual report on Form 10-K of Eiger BioPharmaceuticals, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting.Date: March 22, 2017 /s/ David Cory David Cory President and Chief Executive Officer (Principal ExecutiveOfficer)  Exhibit 31.2Certification of Chief Financial OfficerPursuant toSecurities Exchange Act Rules 13A-14(A) and 15D-14(A)I, James Welch, certify that:1.I have reviewed this annual report on Form 10-K of Eiger BioPharmaceuticals, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting.Date: March 22, 2017 /s/ James Welch James Welch Chief Financial Officer(Principal Financial and Accounting Officer)  Exhibit 32.1Certification Pursuant to18 U.S.C. Section 1350,As Adopted Pursuant toSection 906 of the Sarbanes-Oxley Act of 2002In connection with the Annual Report of Eiger BioPharmaceuticals, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2016 (the“Report”), David Cory, President and Chief Executive Officer of the Company, and James Welch, Chief Financial Officer of the Company, each herebycertifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:1. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 22, 2017 /s/ David Cory David Cory President and Chief Executive Officer (Principal ExecutiveOfficer) /s/ James Welch James Welch Chief Financial Officer (Principal Financial and AccountingOfficer) This certification accompanies the Annual Report on Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and isnot to be incorporated by reference into any filing of Eiger BioPharmaceuticals, Inc. under the Securities Act of 1933, as amended, or the Securities ExchangeAct of 1934, as amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in suchfiling. 

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